Despite rising prices, Fed keeps lid on loan backing

by Donald Horne01 Dec 2015
While the decision won’t affect most – with the median home price in most parts of the U.S. pegged at $219,600 – it will have an impact on markets with fast-rising home values, such as California.

“If we don’t get an increase in the high-cost loan limit, it’s going to be very disappointing,” said Leslie Appleton-Young, chief economist for the California Association of Realtors, told the Wall Street Journal before the new limits were announced.

The Federal Housing Finance Agency for an 11th year in a row to limit mortgage-finance giants Fannie Mae and Freddie Mac to back only loans of $417,000 or less in most markets next year. 

Cities such as San Jose, Calif., San Francisco and New York, identified as being high-cost, will keep a limit of $625,500.

For those offering jumbo mortgages, that ceiling has been a lucrative one, with Parkside Lending among those making the move to offer 95% LTV on a jumbo, even without mortgage insurance.

“We believe our new jumbo loan offering is an important financing alternative for a specific segment of creditworthy borrowers,” said James Lamparter, executive vice president of sales for Parkside Lending. “We continue to grow our jumbo product line as we identify different needs in the marketplace.”

That growth in the jumbo line includes going up to 95% on a $1 million deal, but is limited to a one-unit, owner-occupied purchase.

Jumbo mortgages made up nearly 19% of the market in the first nine months of the year, according to Inside Mortgage Finance, up from a low of 5.5% in 2009. The hot California housing market has embraced jumbo mortgages more than anywhere else in the country.

More than half of San Jose’s for-sale listings in September have asking prices that would require a jumbo loan assuming the borrower made a 25% down payment, according to an analysis for The Wall Street Journal by real-estate information site Zillow. The same could be said for about 44% of listings in San Francisco, 36% in Los Angeles and 35% in San Diego.

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