Freddie Mac to help with jumbo loans
Jumbo home loans -- anything larger than $417,000 -- have become more expensive than regular mortgages. They're 7% instead of 5.9%. Now Freddie Mac has a deal with four lenders to lower the rate. Jill Barshay reports.
Acquiring a mortgage loan (iStockPhoto.com)
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Lisa Napoli: Now, jumbo loans don't come cheap. The interest rate on big mortgages over $417,000 is typically a percent or more higher than smaller loans. Marketplace's Jill Barshay reports that Freddie Mac announced a new deal with four mortgage lenders to try to lower that.
Jill Barshay: Congress tried to ease jumbo loan rates in February. It allowed Fannie Mae and Freddie Mac to guarantee bigger mortgages -- up to almost $730,000 dollars. But banks are still reluctant to lower rates. Bob Ryan is a Freddie Mac vice president. He says banks need to sell these loans to investors, but they can't because investors are aren't buying.
Bob Ryan: And so, we've stepped in as investor, therefore freeing up the lenders balance sheets and the ability for them to concentrate on originating these loans.
Freddie Mac plans to buy as much as $15 billion of these loans from four lenders, including Citibank and Wells Fargo. Fannie Mae says it's buying jumbo loans too.
Homebuyers in the most expensive regions will benefit. Only where property values are highest -- cities like New York and Los Angeles -- can Fannie and Freddie go up to the maximum.
In New York, I'm Jill Barshay for Marketplace.
