Stimulus deal would help California homebuyers with jumbo mortgages
0 Comments | Oakland Tribune, Jan 24, 2008 | by Elise Ackerman
The economic stimulus package announced this morning by congressional leaders includes major relief for Bay Area residents looking to buy a home or refinance an existing jumbo mortgage.
In addition to rebates of $600 to $1,200 for most taxpayers – plus another $300 per child for those with children – the package will dramatically lower the cost of mortgages between $417,000 and $729,000, increasing the affordability of homes throughout Northern California and potentially saving people from foreclosure.
“This will be huge,” said Carl San Miguel, past president of the Santa Clara County Association of Realtors. “We have been fighting the feds on this at least ten years.”
The change is temporary and will be in place for one year.
The stimulus package raises the limit on so-called “conforming” loans, which had been set at $417,000 for everywhere except “high- cost” cost areas, which were defined as Hawaii, Alaska, Guam and the Virgin Islands.
In California, mortgage lenders charge a significant premium for “jumbo” loans above $417,000. This morning, for example, the interest rate on a 30-year fixed-rate conforming loan offered by Wells Fargo was 5.625 percent. But a jumbo mortgage with the same terms had a 6.75 percent rate.
During the first half of 2007, 73 percent of people who bought homes in Santa Clara County used jumbo loans to finance their purchases. Bay Area-wide, 62 percent of homebuyers financed with jumbo loans.
Dick Gaylord, president of the National Association of Realtors, said the higher cap could strengthen the housing marketing around the country.
“The increase in loan limits will provide immediate liquidity to the mortgage market in all parts of the country allowing qualified home buyers who have been on the sidelines to re-enter the market,” Gaylord said in a statement. “We urge the Senate to work with the House and the President to achieve quick enactment of these important measures.”
House Speaker Nancy Pelosi said Congress would act on the agreement – hammered out in a week of intense negotiations with Republican Leader John A