THE BASIS POINT

WeeklyBasis 11/10/08: Overview of 2009 Conforming vs. Jumbo Rates

 

Fixed and ARM rates for loans up to $729k are down about .5% from two weeks ago, which continues a weekly .375% to .5% up/down trend for the past few months. Rates on loans above $729k are consistent because they continue to be priced more on lenders’ willingness to lend than on market forces. Super-conforming loans up to $729k will be phased out between now and December 31 because all lenders—big or small—who make these loans must sell these loans to Fannie Mae or Freddie Mac by December 31.

Most lenders are phasing out high-limit conforming loans by November 20, meaning borrowers must submit a loan today to close it by November 20. If it’s not in by today, borrowers need to go to the next option (because most banks are closed Tuesday 11/11 for Veteran’s Day). The next deadlines are as follows: RPM Mortgage, Citimortgage and GMAC are allowing these loans to be submitted until December 15 and they must close by December 31.

The 2009 conforming loan limits were announced at $417,000, with high-cost areas allowed to go up to $625,500 (which is 150% of $417,000). The announcement says that there is a 30 day appeal period for “those wishing to contest its median price estimates. Appeals are to be based upon data suggesting a potentially higher price median for a given area.”

This is a departure from past years when there was one limit nationwide. Setting loan limits by location is a new process brought about by legislative influence during 2008, and it’s possible limits could go above $625,500 for certain areas because of lobbying efforts or a new economic stimulus package that is widely expected.

If conforming limits remain at $625,500 and a borrower has a 20% down payment, this translates into a $782k purchase price. So it still gets borrowers pretty far even in high cost areas. The spread between super conforming and jumbo 30yr fixed is .375% to .625% depending on daily trading in conforming rate markets. Jumbo ARMs are actually cheaper than super conforming ARMs—but down payment requirements can be 25-30% instead of 20% on jumbo ARMs.

Economic news this week is light with Jobless Claims Thursday and Retail Sales Friday, so market movement will come mostly from credit crisis developments and stock market activity.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.25% (6.36% APR)
15 Year: 6.0% (6.11% APR)
5/1 ARM: 6.625% (6.73% APR)—See Jumbos for Lower Rates

Super-Conforming ($417,001 to $729,750 cap by county) – NO POINTS
30 Year: 6.625% (6.72%)

Jumbo ($729,751 – $1,500,000) – NO POINTS
30 Year: 7.25% (7.36% APR)
7/1 ARM: 6.25% (6.21% APR)
5/1 ARM: 6.0 % (6.11% APR)

 

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