BluefoxToday blog : Freddie Mac to the rescue

Freddie Mac to the rescue

Freddie Mac is one of the big players in the secondary mortgage market, buying conforming loans there to add liquidity to the vast home finance system. The current conforming loan limit is $417,000 and anything above that is called jumbo and interest rates at that altitude generally hover as much as 1.00% higher than for the conforming money. A significant disadvantage to homeowners who wish to refinance or buyers looking to bankroll a purchase. But the Economic Stimulus Act of 2008 changed the loan limit and it can now go up to $729,750 in designated expensive areas. The change is good only until the end of this year, but can be extended by Congress.  

Since the new legislation was approved Freddie Mac has negotiated with Chase, CitiMortgage, WaMU and Wells Fargo, the fearsome foursome, to purchase loans from them originated in 224 high-priced markets where median home values top the $417,000 ceiling. The firm predicts the volume of the new conforming jumbo mortgages it'll buy will be worth between $10 and $15 billion this year. It also is conducting discussions with other large lenders to do the same with them.

The expected interest rates for these fresh conforming jumbos should be about .50% below the regular jumbos in these markets, but still about .50% higher than for loans under the $417,000 limit. So, they'll fall somewhere right in between the two.

While each lender will determine its own specific loan portfolio, Freddie Mac is committed to buying the following loan products; 15-, 20-, 30- and 40- year fixed-rate programs, 30-year fixed-rate loans with 10-year interest-only period, fully-amortized 5/1 ARMs and 5/1 ARMs with 10-year interest-only time frame. Cash-out refinance up to $100,000 is also available to qualified homeowners.

This certainly will add liquidity to the marketplace and with it comes a more stable lending environment, a critical component that has been shaken badly in the last year or so.



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 10 commentsEsko Kiuru • April 24 2008 12:08AM


Esko:  Sure, the loan limit has changed, and that means loans over $417,000 will no longer be subject to the 1% rate premium you mention... but is that a good thing ?  If in order to make up for the lessening of their profits, the lenders must tighten up on their qualifying guidelines to lessen their risk, what good is the change ?
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago



As noted on, kaki Earth Day may hereforth be known as the day state loans became doable again.  Here's something interesting. For the last several years, the California Housing Finance Agency loans have not been particularly useful to a lot of us here in Southern California, merely because the numbers have not worked - the money just didn't seem to go far enough. But now, with prices dropping, the $450,000 loan limit is looking a lot more reasonable. Not to mention the fact that CalHFA is now offer a variety of 35 + 40 year loan packages. For more information, contact CalHFA Homeownership Programs by phone 916.324.8088; by fax 916.324.6589; by email at and you can always visit CalHFA's web site at: 

Posted by Jodi Summers, Our reputation assures your satisfaction. (Sotheby's International Realty) almost 11 years ago
When you think the median priced home in our market was a jumbo loan; it is only fair they update the limit.
Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) almost 11 years ago
Esko a half a percent on those loan sizes can be a significant savings.  It would be nice though if the FHA Bill would finally make it out of the House and Senate though.
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 11 years ago


This change in the loan limits really was long overdue.

Posted by Esko Kiuru almost 11 years ago


These new mortgage loan limits should be extra helpful in California.

Posted by Esko Kiuru almost 11 years ago


Hopefully Congress will extend the limits beyond this year.

Posted by Esko Kiuru almost 11 years ago


The cheaper money can make a big difference in these conforming jumbo mortgages.

Posted by Esko Kiuru almost 11 years ago
Thanks Esko, for keeping us so well-informed.
Posted by June Stark, Las Vegas Condos & Luxury Homes Expert (Elite Realty-Luxury Homes & Condos On & Off the Strip) almost 11 years ago


Any time. Good to see more flexibility in the mortgage world.

Posted by Esko Kiuru almost 11 years ago