Daily Real Estate News  |  August 29, 2007  |   Rising Jumbo Rates Force Buyer, Lender Creativity
Rising jumbo loan rates are making $417,000 a magic number for home shoppers.

With investors reluctant to buy loans for more than that amount, buyers in expensive areas are forced to figure out a way around the dilemma or to just sit tight until the rates go down.

Sixteen percent of all new mortgages last year were jumbo loans, according to the trade publication Inside Mortgage Finance.

"Lenders are all putting our collective heads together to come up with a new way to get borrowers into houses," says Bill McGoey, a senior vice president at American Partners Bank, owned by the thrift holding company Federal City Bancorp in Washington, DC. "There are tools that we've been using forever, but we've had to tweak them to suit the current situation."

Lenders were charging an average 7.46 percent for prime 30-year, fixed-rate jumbo loans last week, compared with 6.57 percent for conforming loans, according to mortgage research firm HSH Associates. Piggybacking loans is the most common way around the problem because, for instance, two $300,000 mortgages are easier to get and a half-point cheaper than one $600,000 loan.

Source: The Washington Post, Dina ElBoghdady (08/29/2007)