Mortgage bankers lobbied hard to get the loan limits on Fannie Mac and Freddie Mac insured loans increased. In high-cost California the limit was raised to $729,000. The changes were announced in March and were supposed to go into effect April 1.
But morgage brokers have yet to see the benefit. The spread between jumbo rates and conforming rates remains unusually high. A 30 fixed rate conforming loan costs 5.66% presently. The jumbo version: 7.11%. “The standard .25% to .5% spread between and conforming and jumbo is now 1.5%,” says Peter Ogilvie, president of California Assoc. of Mortgage Brokers. “It didn’t fall as much expected.”
Ogilvie says Fannie and Freddie should be rollowing out new loan products come May 1 that will help make mortgages more affordable. For now though loan volumes remain weeak as skittish buyers sit on the sidelines and the anticipated increase in refinancings is delayed. “Once lending practices loosen up and as rates fall, banks are going to want to loan money again,” says Mark Boud, president of consulting frim Real Estate Economcis. “There’s going to be a refi boom.”