The majority of home owners who have jumbo loans have been stuck with few options if they were seeking a refinance of their home mortgage. Interest rates for jumbo loans have averaged eight percent or higher for the past four months, despite a mortgage market for conventional loans that has been at or below six percent for much of the time. In the past five years the spread between conventional financing an jumbo loan financing interest rates has been on average about .25%. This spread is now in excess of two percent.

The major reason for the large difference in rates between the two sets of loans, is that their is no demand for mortgages that are not able to be sold to Fannie Mae or Freddie Mac in the marketplace today. The credit markets have changed radically and lenders simply do not want to own loans that are not eligible for sale to an agency lender. Earlier this year, Thornburg Mortgage one of the largest independent mortgage companies specializing in jumbo and super jumbo loans was almost forced into bankruptcy. Despite a loan portfolio with average credit scores well above 700 the market has completely discounted the value of their mortgage assets to the point they faced sever margin calls. Lenders are now scared to carry any loan on their book that could result in a future write down and is not guaranteed to be eligible for sale in the secondary market.

This past week saw the first signs of relief for this market. As part of the economic stimulus packages that was innacted this year, lenders have the opportunity to sell jumbo loans directly to Fannie Mae and Freddie Mac. This new opportunity is available on a county by county basis for loans up to 729,000 and home owners must be able to qualify with traditional underwriting. This typically means providing two years of w-2′s, asset statements, etc. Previously a number of jumbo loan lenders simply went by assets and credit score. This could eliminate borrowers who are self employed and do not fully document their income. These loans are also eligible for home owners who are looking to purchase a property and will help to boost the marketplace for larger homes. Not all lenders offer these new loan programs so you may need to shop around to find a lender that is offering a conventional jumbo loan.

Author: Oliver Kyle
Article Source: EzineArticles.com
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