Fannie Mae and Freddie Mac are once again getting ready to begin buying "super-conforming" mortgage loans of up to $729,750, which should bring rates down for borrowers with good credit seeking loans previously classified as jumbo.
Currently, loans more than the $417,000 conforming limit in "normal" Fannie mae housing markets — or the super-conforming limit of up to $625,500 in high-cost markets — are considered jumbo loans.
Jumbo loans carry higher rates because they are not eligible to be purchased or guaranteed by Fannie Mae and Freddie Mac. Jumbo loan rates are at least 1 percent to 1.5 percent higher than regular loans of less than $417,000.
Then there are the so-called super-conforming loans that exceed the $417,000 conforming loan limit, and are eligible for purchase or guarantee by Fannie and Freddie.
Super-conforming loans also carry slightly higher interest rates than regular conforming loans — about .25% to .30%.
On Jan. 1, the upper limit for super-conforming loans was rolled back from $729,750 to $625,500. With the economic stimulus bill signed into law Feb. 17,it restored the higher limit for single-family homes in high-cost markets that was in place for much of 2008.
The following week, the Federal Housing Finance Agency published lookup tables for the new Fannie and Freddie limits in high-cost markets — 250 counties nationwide.
Starting May 4 both companies will begin buying super conforming loans of up to $729,750 from lenders, which is great news for Rumson buyers as the average closed price is $786,250 and for Monmouth County average closed price $541,355.
With this new policy this could mean lower rates for some borrowers seeking loans that were previously classified as jumbo.
Buyers will need a FICO scores of at least 700 to obtain fixed-rate super-conforming mortgages, and provide at least a 10 percent down payment.
Freddie Mac will require down payments of at least 20 percent for loans above $625,500.
For the buyers that are putting down less than 20% on loans larger that $625,000 Fannie and Freddie Mac will require Appraisal Reviews.
The secondary market for loans not backed by Fannie and Freddie pretty much dried up and lenders have been charging more for jumbo loans, because they must hold them on their books.
Last year, Congress temporarily raised the $417,000 loan limit, but only in high-cost housing areas. The new rules allowed Fannie and Freddie to buy or guarantee loans of up to 125 percent of the median home price in high-cost areas, with an upper limit of $729,750.
This year's stimulus bill, H.R. 1, the American Recovery and Reinvestment Act, restored the super-conforming loan limits in place for high-cost housing markets during much of 2008.
The bill also restored the Federal Housing Administration's ability to guarantee loans of up to 125 percent of the median home price in high-cost markets, up to a maximum of $729,750 for one-unit properties.
FHA's loan limits in normal markets remains $271,050 for one-unit properties.
There are 73 counties at the $729,750 FHA ceiling, and 666 counties where loan limits are between the $271,050 floor and the $729,750 ceiling for one-unit properties.
A Department of Housing and Urban Development Web search page for New Jersey counties provides current FHA mortgage limits.