Super Conforming Fixed by April 1, ARMs by May 1
Below is a news announcement about super conforming loans sent out by FNMA to mortgage banks. Looks like, for conforming fixed rate loans above $417k, they won’t start buying until April 1 … and for conforming ARM loans above $417k, they won’t start buying until May 1.
It’s important for home loan borrowers to understand that there are three critical steps for implementation of new conforming loans. These three steps have to happen for fixed loans, then these three steps have to happen again for ARM loans.
(1) HUD has to announce new loan limits that FNMA, FHLMC, and FHA will be able to purchase.
(2) FNMA, FHLMC and FHA have to announce their revised guidelines for underwriting these loans
(3) Lenders have to implement these new guidelines, add any risk-control overlays they need to further protect them. Then lenders need to price them. As we’ve reported several times before, the rates on conforming loans above $417k are very likely to be higher than loans up to $417k.
FNMA ANNOUNCEMENT TO MORTGAGE BANKS ABOUT NEW LOAN LIMITS
Fannie Mae’s Announcement 08-05, Temporary Increase to Our Conventional Loan Limits, provides details on borrower and product eligibility, underwriting, pricing, and delivery of Jumbo-Conforming Mortgages for certain high-cost areas.
To help provide liquidity to this market segment, we will accept whole loans and MBS deliveries of Jumbo-Conforming Mortgages starting April 1, 2008 for 15- and 30-year FRMs, and starting May 1, 2008 for 5/1 ARMs. A 5/1 ARM with a 10-year interest-only period will be available in addition to fully amortizing options.
We are pleased to offer a new solution for lenders that do business in high-cost areas where borrowers have been impacted by the higher cost of jumbo mortgage credit. To address those needs, we are moving quickly to begin accepting deliveries of these loans as soon as possible. Jumbo-conforming loans will be a standard offering in the Selling Guide.
The loan limit for Jumbo-Conforming Mortgages will be the higher of $417,000 or 125% of the area median home price (not to exceed 175% of $417,000, or $729,750) in high-cost areas as defined by the U.S. Department of Housing and Urban Development (limits may vary for Alaska, Hawaii, the Virgin Islands, and Guam).