While Libor has been heading up amid complaints “that financial institutions weren’t telling the truth about their funding costs after rising mortgage defaults contaminated credit markets and drove up borrowing costs,” jumbo-conforming rates have been heading down following Fannie Mae’s decision to raise their purchase price for the loans last Tuesday.
From Julian Hebron at RPM:
The [jumbo-conforming] rate drop [of about 0.5% over the past week] is good news, but approval guidelines for these loans are strict. Borrowers must have at least 10% equity, or at least 15% equity if their property is a designated declining market—even San Francisco and Marin Counties are on many lenders’ declining lists. Cash-out loans require 25% equity, and cash-out is limited to $100k. Loans require full documentation, 1-unit properties only (condos ok), debt-to-income ratios of 45% or lower, and 700 minimum credit scores.
Fannie Mae has said they may announce less stringent guidelines as soon as this week, but all lenders can overlay their own risk-control guidelines and rate premiums beyond what Fannie Mae (or Freddie Mac) may require.
With the rate drop, jumbo-conforming mortgages are now being offered for around 6.25%. That’s a 0.625% (62.5 bps) discount to jumbo rates (6.875%) and only a 0.25% (25 bps) premium over conforming (6.0%).
∙ Libor Set for Overhaul as Credibility Is Doubted [Bloomberg]
∙ If Lowering Rates Isn’t Working, Perhaps Increasing Limits Will [SocketSite]
∙ Mortgage Rate/Spread Update: Are You Feeling Stimulated Yet? [SocketSite]