The Return of Jumbo Mortgage?

Interesting article from Wall Street Journal about possible sign of return of Jumbo Mortgage.

The Return of Jumbo Mortgage
http://online.wsj.com/article/SB123889296585690021.html

As you may know, due to recent tightening of lending, I've believe approx. 80% mortgage issued are GSE (Fannie Mae/Freddie Mac) backed "Conforming Mortgage". Since conforming mortgage limit is $417,000 (in expensive cities like San Francisco, it is $729,750), tight financing guideline for Jumbo Mortgage has slowed down high-end real estate market drastically. Even if you are qualified, borrowers had to pay approx. 2% higher rate than they do on conforming mortgage.

This article report about lowering rates on Jumbo Mortgage:

Bank of America recently began trumpeting its jumbo program, offering 30-year fixed-rate jumbo mortgages with rates in the high-5% range. "We decided it was time to really go after that market," says Vijay Lala, a product management executive for the bank.

The rates on 30-year fixed-rate jumbo mortgages averaged 6.5% for the week ended March 27 -- the lowest since May 2007, according to HSH Associates, a publisher of consumer loan information. On Oct. 31, a recent high point, the average rate on a 30-year fixed-rate jumbo mortgage was 7.9%, according to HSH data.

At this moment, conforming mortgage rate is around 4.75%. It looks like "premium" on Jumbo Mortgage has reduced to 1% (Vs. 2% 6 month ago).

While lending guideline is still very tight (31% PITI on Income Ratio, 20%+ down payment, etc..), I think this is very good news on expensive real estate markets like New York City and San Francisco Bay Area.

Happy Investing!!!