The housing market deterioration and severe lender credit crunch has been extremely challenging for home owners who have seen the values of their homes decline. The market that has been hit the hardest is the real estate market for homes valued over five hundred thousand dollars and typically financed with a jumbo loan.

The term jumbo loan refers to a mortgage that is over $417,000, this loan amount is the maximum amount for a loan that is eligible to be underwritten and securitized by Fannie Mae and Freddie Mac the two largest conventional mortgage agencies in the country. These agencies play a crucial role in the housing market as the standars that they set for lenders to follow allow for their mortgages to be sold on the secondary market. When the credit markets collapsed in August of 2007 almost all loans that were not being securitized by Fannie Mae, Freddie Mac of FHA have ceased to exist. The lack of a secondary market in which these loans could be sold has prohibited lenders from offering these loans to buyers or home owners, even those who have outstanding credit, long job histories and adequate assets. This market deterioration has been a major dillema for housing markets such as California and Hawaii where most homes sell in excess of five hundred thousand dollars. The ability to sell these properties without financing options for the new home buyers. For home owners who have a larger home and may have originally taken out a variable rate loan they are stuck in a position of not being able to refinance out of these loans, even with the recent drop with interest rates. Jumbo loan rates are now averaging about one to one and half percent higher than a conventional mortgage, which equates to thousands of dollars per year of interest on loan amounts over four hundred thousand.

The good news for home owners who have jumbo loans and would like to explore refinancing these mortgages in the future is that the government has recently passed legislation that will allow for agencies such as Fannie Mae and Freddie Mac to raise their loan limits in certain high value areas to as high as $725,000 in an attempt to help improve this market. Home owners with jumbo loans should be able to take advantage of this temporary adjustment starting in July of 2008 and lasting for a period of one year. This should help to improve the housing market for larger homes and provide some needed relief for a real estate market that has been beaten down over the past two years.

Author: Oliver Kyle
Article Source: EzineArticles.com
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