“The average 30-year fixed jumbo loan rate was 7.32 percent on Dec. 22, compared with 5.38 percent for a conforming loan, according to BanxQuote of White Plains, New York.
The difference between them has averaged 2.13 percentage points in December, 10 times the average spread from 2000 to 2006 and above last month’s 1.95 percentage points that was the highest on record.”
Jumbo Mortgage Shoppers Get Little Relief From Fed Rate Cuts [Bloomberg]

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Comments from “Plugged-In” Readers

  1. Posted by poor owner living in potrero

    this is why the ‘real’ SF market (barring govt intervention in this sector), will now being ot fall faster than the outlying areas.
    the spread between jumbos and the conformings will cause the price spread between ‘jumbo’ and ‘conforming’ priced properties to slowly disappear.
    outlying areas flat to up. ‘real’ SF way down.
    color me blue, but que sera sera.

  2. Posted by plan C-sparky

    The spread is high, yes, but that is becuase the conforming loan is as low as it has been since ’71. 7.32 is a better rate than ’00 and ’01 (the start of the boom/bubble)

  3. Posted by The Milkshake of Despair

    I wonder whether the higher spread to jumbos is due to the risk premium for large loans being adjusted upwards. Surely a bank’s in-house actuarial department gets the bad news of missing payments long before it hits the media.

  4. Posted by gmh

    Sparky – True. But prices were much lower back then, and the economy was starting to recover from a recession rather than starting to enter the biggest downturn since the Great Depression. Very hard to see how prices could sustain themselves anywhere near 2006-2007 levels with rates that are near 2000-2001 levels.

  5. Posted by sparky-C

    I’m all for 2001 prices.

  6. Posted by Dede

    The spread for jumbos is higher because they are harder to sell – so lenders making jumbos will keep them on their books instead selling them on the MBS market.
    [and oh, happy holidays, needed a break from the inlaws….]

  7. Posted by waiting to buy

    What is the rate for the “conforming jumbo” up to 625K or so (not sure the exact ceiling amount)?

  8. Posted by whorfin

    What is the rate for the “conforming jumbo” up to 625K or so (not sure the exact ceiling amount)?
    I just started a refinance for $625k at 4.875%. I could have gone > $625k at 5.875%…

  9. Posted by REpornaddict

    higher for 2 units etc
    800k is the new limit there – i am just starting a 5% 30yr 800k refi application
    i only bought the building last year, but this will make it cashflow positive, and very close to break even taking into account the principal payment.

  10. Posted by Trip

    CR posts an article noting the rush to refi in Florida based on these low rates but noting that few applicants can actually qualify — even for a conforming loan. The problem is an applicant needs 20 percent equity (presumably at a current appraisal value), owner-occupied, FICO of 700 or higher, mortgage debt-to-income ratio of 45% or lower, and full documentation of income and assets. I assume the same holds in SF, but can anyone verify one way or the other? As many here have surmised, the problem with refis here is not the interest rate but the inability to come up with the huge down payment and/or inadequate documented income.

  11. Posted by gowiththeflow

    Trip you are about right. I just did a refi before the 729k increased conforming (jumbo) window closed.
    As you know in the past few weeks rates have come down but the limit has been reduced to 625k.
    The biggest hurdle for a refi going forward is the LTV specifically if you need to carry a 2nd. Rates on 2nds have been climbing and continue to do so, plus most banks now require 70% LTV if you have a 2nd where as just last week it was still 75%. Given values may drop that obviously equates to bringing a check to escrow.
    If your 2nd balance is small, you can offset the higher 2nd rates if you need one and like to play with fire (in my opinion) by doing a variable rate equity, and perhaps IO.
    This is where I am torn. Do you lock the second of let it float on the low variable rate?
    Yes owner occ, full doc (expect to provide even more if self employed), Fico min at 700 whith that being low now, max 38% DTI, LTV 75% with no second and 70% with.

  12. Posted by tipster

    “Yes owner occ, full doc (expect to provide even more if self employed), Fico min at 700 whith that being low now, max 38% DTI, LTV 75% with no second and 70% with.”
    To be sure, some people will continue to qualify with these requirements, but nowhere near the number who qualified last year.
    Now you can see why the number of sales is down as far as it is. Only 30% of the people are qualifying compared to last year so volumes are down by 70%. As more and more people get laid off, the banks will add a requirement of 6 months of reserves.

  13. Posted by NoeValleyJim

    I just started a refinance for $625k at 4.875%.
    Where did you get this rate whorfin? I am pretty happy with my 30 year 5.25%, but would refi if I could get that rate.
    Happy Holidays everyone!

  14. Posted by gowiththeflow

    Tipster in some cases they are all ready requiring 6 mo. reserves.
    Noe if you dont mind my asking you mentioned you just did a refi under the increased 729k limit did you not? Do you feel inclined to refi again with the lower rates under the new 625k limit? I am not sure where I stand on this but am in that boat.

  15. Posted by darren

    Has anyone found a lender that’s actually respecting the $625k limit? We have yet to find a lender who doesn’t consider anything between $417k and $625k a jumbo loan…

  16. Posted by Dave

    I’m also wondering where you can get an $800K 30-year fixed at 5%. I can’t find anything less than around 7% — and that’s with tons of equity and a FICO near 800. The spread between conforming and jumbo is just outrageous.
    Guess I’m going to stick with my adjustable (about to adjust upward to 4.75%, so not so bad in the short to medium term) a bit longer.

  17. Posted by NoeValleyJim

    I did a bit of searching and found AimLoan.com, no idea if they are legit or not, but they advertise through bankrate.com, so they are probably okay. They are offering a 30 year fixed for 5 3/8% for amounts up to $625k. It is 25 points less for a normal conforming loan (under $417k).

  18. Posted by REpornaddict

    Dave,
    the 80k 5% fixed 30 year I mentioned is for a 2 unit building -so its not a jumbo under the new limits. (2 units has a higher limit than the 625k for SFHs)

  19. Posted by REpornaddict

    That should read 800k of course, not 80k..

  20. Posted by gowiththeflow

    625k is the new temp increased conforming limit – it was 729k or so up until recently. However most banks from what I found still qual anything over 417k as a “jumbo” even if they call it an increased conforming.
    Rates are typically higher than conforming but not as high as a jumbo.
    You should be able to find a 625k no points between 5.125% and 5.5% 30 year fixed fully amm. in SF. with good credit and a 70-75% LTV.
    Be careful if you plan to refi in the future. From what I heard/ found out the 625k is a temp increased limit just like the 729k was and if you plan to refi in the future and the limit is reduced you will either need to put more on a 2nd or bring a check to escrow to close.
    If you do a 2nd equity line or loan things are getting a bit tricky as most banks have adjusted the LTV to 70% to carry one.

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