Banks Say Big Benefit to those Refinancing a Jumbo Conforming “High Balance” Mortgage, by Rosemary Rugnetta,

( – Prior to the financial crisis that occurred several years ago, any mortgage above the Fannie Mae and Freddie Mac conforming loan limit was considered a non-conforming jumbo loan. With the Housing and Economic Recovery Act of 2008, the conforming loan limit was raised to $729,750 or 125% of the median home value within a metropolitan area, whichever is less. This rule has been extended through the end of 2010. Due to this change in conforming loan limit, banks are saying that there is a big benefit to those refinancing a jumbo conforming “high balance” mortgage at today’s rates. Many of these homeowners are seeing the potential benefits and are refinancing their non-conforming high interest jumbo loans to lower conforming interest rates.

In the past, many homeowners purchased homes that required a high balance jumbo mortgage which carried higher interest rates for the term of the loan. In order to avoid the higher interest rates of jumbo loans, many homeowners chose to take on 2 loans. Today, numerous borrowers are able to refinance to a conventional conforming jumbo loan depending on the area in which they live. These borrowers must still qualify under the current guidelines. Conforming conventional loans are those that are underwritten by banks and follow Fannie Mae and Freddie Mac guidelines and do not exceed the loan limits. Due to the increase of loan limits, over 6% of homeowners fall into this category in 197 designated high cost areas in the United States. Even though today’s underwriting standards are stricter, these jumbo conforming conventional loans are still easier to obtain than non-conforming jumbo loans which are considered riskier for a lender.

A top national branch manager of Homes Savings of America has stated that they are having a lot of success with the high balance jumbo conforming loan which has turned out to be a tremendous benefit to borrowers in this category. Many of these homeowners are carrying jumbo mortgages with interest rates in the mid to high 6’s. Today’s jumbo conforming 30 year fixed-rate of 4.375% is available to well-qualified homeowners who pay the standard .07 to 1 point origination fee. If these same borrowers had to refinance to a true jumbo loan of the past, they would be doing so at fixed rates in the low 5’s or about a full percentage point higher than conforming rates. Even those who originally took on 2 loans to avoid jumbo mortgage rates would benefit from refinancing both loans to today’s jumbo conforming fixed rate loan.

As banks continue to see their refinance business increase with homeowners who were originally locked into true jumbo loans, the deadline is drawing near unless it is extended during this last quarter of 2010. The savings benefit to those refinancing to a jumbo conforming high balance mortgage can have a double effect. These refinances result in lower monthly mortgage payments for homeowners and aid the economic recovery by putting more cash into the hands of consumers.

MIT Economist Sees Housing Market Roaring Back, by Dakota,

Picking up on the news that housing starts–ie, the start of construction of new buildings and homes–picked up in August, rising to the biggest levels seen November, Fortune says the housing market “is still far from recovery” but also points out its on “bullish take on the housing market,” a piece centered largely around a 2009 paper by economist Bill Wheaton at the Massachusetts Institute of Technology‘s Center for Real Estate. Yes, stop all those stories about how the days of seeing our homes as money-generating nest eggs are over. In short, Wheaton thinks the market will come roaring back, partly because so little construction is going on. Via Fortune: “The crux of Wheaton’s argument lies in the rate of residential construction today. It’s been historically low – so low that he believes demand is actually exceeding the level of building going on. This helps set the grooves for a relatively large comeback in residential investment. Here’s how Wheaton backs the imbalance of demand for housing units and residential construction. He estimates that housing demand in 2009 was at about 1.1 million units – more than twice construction at the time. At this rate, the excess inventory will eventually be absorbed. “It’s going to be a long time before construction picks up with demand,” Wheaton says, adding that this should help housing prices.”
· Housing market shows glimmer of hope [Fortune]
· A housing rebound? Yes, it’s possible [Fortune]