There may be good news on the horizon for the mortgage crunch. As you, I’m sure, are aware… we’re in a bit of a mortgage crunch there days. While interest rates are steady falling on conforming loans (those for $417,000 and under), rates on jumo loans took a jump recently. San Francisco home buyers are feeling the crunch in the increase in their monthly payments.
Sen. Charles Schumer Monday announced legislation that would allow Fannie Mae and Freddie Mac to buy an additional $145 billion in mortgages. The Protecting Access to Safe Mortgages Act, (as his bill is called) would help the 40 percent of subprime borrowers who qualified for prime loans, but ended up with riskier loans because they didn’t realize the potential consequences of the loans, and lenders either didn’t take the time to explain the risks, or the borrowers went ahead anyway.
This bill would also raise the limit on conforming loans from $417,000 to as much as $626,000 in high cost areas… and SF is definitely one of them. That means that a home with a purchase price of $782,500 with 20% down, or with 10% down and a 10% second loan would qualify for the conforming loan, at an interest rate than today, fell just below 6%, compared to 7.5% to 8% for a 30 year fixed jumbo loan. The Bush administration opposes the bill.
Unfortunately, the full article in the Wall Street Journal is only for subscribers… but if you are a subscriber, you can link to it here.