Fannie Mae has made an announcement on the timing of when they will be buying the new "Jumbo-Conforming Loans" as they are now calling loans between $417K and the increased limit of $729,750. It is a still a bit confusing but it sounds like they will not be buying loans until July 1, 2008. However, it sounds like they are authorizing lenders to underwrite loans staring April 1, 2008 (with an application date after March 1, 2008).

According to Fannie Mae's most recent update, they will have different (more stringent) guidelines for "Jumbo-Conforming Loans". This does not come as a huge surprise but from what I can see, the new "Jumbo-Conforming Loans" will be verylimited in who will benefit. Here are a few of the high points from what I can tell in their guidelines:

•  Only 1 unit properties (no 2-plex, 3-plex, or 4-plex)
  
• When purchasing a home, minimum down payment is 10% with a 700 FICO score (only on a fixed rate mortgage). The only ARM program available is a 5/1 ARM and a 20% down payment is required with a 660 minimum FICO. 
  
•  When refinancing a home, no cash out is allowed.
  
• On a second home or investment property, a minimum of 40% down payment is required.
  
• Consolidating a first mortgage and a second mortgage is not allowed.
  
• Refinancing within 6 months of a purchase is not allowed (you must have owned the property for at least 6 months before you can refinance the mortgage into a "Jumbo-Conforming loan").
   
  

Additionally, interest rates on conforming loans (and Jumbo loans) have risen anywhere from 0.5-1.0% in the last week (depending on the loan program). Therefore, conforming interest rates are close to what Jumbo rates were about 2 weeks ago. This is not a total surprise as the bond market anticipates a greater supply of mortgages available for purchase, increasing rates is the short term.

Overall, these new guidelines will help some people get into a better mortgage at a lower rate. In the meantime, I'll be watching closely to see what pans out over the next month or so as the market adjusts to new conditions. I believe that the recent increase in rates is due, in part, to the level of uncertainty about the impact of these guidelines.

For additional information, please see Announcement 08-05, "Temporary Increase to Our Conventional Loan Limits" at www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0805.pdf

If you or someone you care about wants to know how they may benefit from this information, please tell them and tell me.

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