HousingWire – Christina Mlynski
The Federal Housing Finance Agency may reduce its conforming loan limits for Fannie Mae and Freddie Mac-purchased loans, creating a new opportunity for the private jumbo market to soar again.
While lower government-sponsored enterprise loan limits and higher guarantee fees reflect continued efforts to reduce the government’s footprint in the mortgage market, a private-label takeover may be more expensive and burdensome to the market, analysts with Royal Bank of Scotland (RBS) said. In other words, it’s not an easy transition.
"The lower loan sizes will continue to help boost the jumbo mortgage market as loans above the limit would have to be funded by private investors," explained RBS mortgage-backed securities analysts Sarah Hu and Ashley Gam.
They added, "However, without government backing, those borrowers who once qualified for conforming high balance loans will find themselves facing jumbo rates. In addition, they will have to meet jumbo/non-conforming guidelines that require larger downpayments and higher credit scores." The jumbo market has continued to grow while the conforming market has continued to shrink on falling refinance demand.