Jumbo Loan Ceiling Raised

Mar 8th, 2008 @ 6:58 PM by Alden Smith

It appears the government is moving on raising caps on jumbo loans for Fannie and Freddie.  Southern California is benefiting from this, as is the Boston area.  Reports show that the limits were raised to the maximum $729,750 in Los Angeles, Orange and Ventura counties, to $697,500 in San Diego County and to $500,000 in Riverside and San Bernardino counties.

In the Boston area, an increase was made to $523,750.  Loans that fall between the old loan ceiling and the new ceiling will likely still carry higher interest rates than traditional conforming mortgages.  These loans have always traditionally been about a percent point higher than traditional confirming loans.  If you can afford a house at $729K, then I guess a percentage point one way or another matters little.

What concerns me is that the people whop really are hurting in this whole scheme of things are blue collar workers, few of who own homes in the $729K range.  It offers little help to these home owners, and is busting up the American dream from their viewpoint.  I believe this matters little in the world of lending and financing. Be that as it may, I am sure there is reasoning behind this.  If it stimulates the economy, then it is a good deal.

I think that the government is worried that any help will be seen as a bailout, which won’t bode well with American taxpayers.  There is little room for compassion when the economy is seen as being in trouble.  On the other side of the coin, if people have gotten so bit by owning their own home that they will take out a mortgage that when it resets, they can no longer pay, then no one is to blame but the borrower.

In the news tonight was an interesting note.  A gentleman has opened a web site up called “You Walk Away” and for the measly sum of $995, you can get all the info you need on how to walk away from a mortgage you can no longer pay.  I wondered how long it would be before this happened.  Sign of the times?