Home loans from $625,500 to $729,750 in high-cost regions, including most of the Bay Area, should get cheaper in the next few weeks.
To make bigger mortgages cheaper, the economic stimulus act passed in February increased the conforming loan limit in high-cost regions to a maximum of $729,750 from $625,500 for single-family homes through the end of this year. The conforming-loan limit is the biggest mortgage that can be purchased by Fannie Mae and Freddie Mac. Anything over the limit is called a jumbo loan, and they cost considerably more than conforming loans because Fannie and Freddie can't buy or guarantee them.
Raising the limit should bring down the price of loans between $625,500 and $729,750. But more than two months after the stimulus bill was signed, loans in that zone are still being priced like jumbo loans.
Lenders say they couldn't lower their rates until Fannie and Freddie issued underwriting criteria. Fannie issued its criteria March 30 and Freddie on April 16. Both will start buying loans of up to $729,750 from lenders on May 4.
That opens the door for lenders to begin making them.
Wells Fargo says it will start making conforming loans of up to $729,750 on Monday.
Bank of America will begin making them "by mid-May," says Vijay Lala, a product executive with the bank.
As they and other lenders start making these loans, the price should come down. By how much remains to be seen.
Source: Kathleen Pender
Thursday, April 23, 2009