Credit Crisis Update

There have been a number of announcements and positive developments over the last couple of weeks that give us all hope in regards to the “Great Credit Freeze” of ’07 and ’08!  Is it finally over? Not by a long shot; but there are signs of a slight thaw!

 

• ­     Fannie Mae announced last week that they would begin securitizing the “Agency Jumbo” product (conforming loans in excess of $417,000) the same as standard conforming loans.  While Fannie and Freddie do not have complete price control, this has had a huge impact on these loans in the price arena.  Whereas the spread in price between loans <$417,000 and those >$417,000 was as high as .75% in rate, today it is only a .125% rate differential (up to the maximum allowed loan of $729,750 in some areas).  This will help ease the rate pain for those borrowers needing financing over the traditional conforming limit and also wanting the security of a fixed rate loan.

• ­     The second announcement came late yesterday (5/16) and brought additional good news for potential home buyers.  Fannie Mae released an announcement that they would go back to 97% financing options for loans that receive an approve response through the automated underwriting system without any consideration or maximum financing reductions for declining markets.  There is at least one MI company that has followed suit and we should see this benefit filter into the market within the next 2 weeks.  It is unclear from the announcement if this will increase maximum financing for the “Agency Jumbo” product but I will update you as soon as I know the answer.

• ­     Lastly, we saw a nice end of the week rally on the Mortgage Backed Securities market which has helped to finally put some downward pressure on rates.  The market is still extremely volatile and subject to intense mood swings an a daily basis.  But if you look at the chart on this page, you can see that we have broken through some key levels of resistance and if the rally can maintain momentum, we may have a small window of attractive rates.  If you are anticipating the need for any financing, act quickly as these windows of opportunity tend to disappear quickly.

 

Thank you for your time and please do not hesitate to contact me if I can ever be of service.