Property Crossroads - Real Estate Info

No one is immune anymore to the mortgage crisis.  Even buyers with high income and assets have to bear the costs of the mortgage meltdown.  Non-conforming (AKA jumbo) loans just became more expensive.

Wells Fargo, one of the nation’s biggest mortgage lenders, raised the interest rates on its 30-year, fixed-rate, non-conforming loan to 8 percent last week. Other lenders followed suit and more are expected to join them.

According to an article written by Les Christie for CNNMoney.com, here are the underlying reasons:

"Why should jumbos, whose borrowers often boast high incomes and assets, cost more than conforming loans? It’s because Wall Street has stopped buying the loans."

"Conforming mortgages, or loans below $417,000, carry much lower risk, because Freddie Mac and Fannie Mae guarantee a market for them.  In a tighter credit market, lenders are charging more for jumbos because of the extra risk of not being able to sell them to the investment community."

Freddie Mac and Fannie Mae are the government sponsored enterprises (GSEs) that buy loans with a cap of $417,000 in the secondary markets.

The higher monthly mortgage costs can put more potential buyers out of the market.  Some of the hotspots that will most likely be affected are the Bay Area, Silicon Valley, Los Angeles and other California Areas, New York region, Boston, Washington D.C. and parts of Florida.