Jumbo Mortgage Loan

There are 2 types of conventional loans - conforming and non-conforming loans. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors.
Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Every year they will revise their loan limit. Currently, for one-family home, the limit is $417,000.
Loans that exceed the limits sets by Fannie Mae and Freddie Mac are known as "Jumbo Loans". This loan has a higher interest rate as they are bought and sold on a smaller scale.
For high-priced areas like Southern California, the $417,000 limit seems a little low. Therefore, the Economic Stimulus Act that was recently passed by President Bush in Feb 2008 enables the HUD to boost conforming loan limits in high-cost areas to as much as $729,750 through the end of this year. This will be good news for people like George DeAnda in Yorba Linda who wants to refinance his $540,000 mortgage.
However, as of this week, the HUD has not come up with numbers yet. They have 30 days from February 13th 2008 to revise the loan limits. The new conforming loan limits will be based on a county-by-county basis.
If this proposal goes through, we would see a conforming-loan limits increase from the current $417,000 to at least $572,500 in Los Angeles County and $650,000 in Orange County.
Homeowners who are currently carrying jumbo loans who have problems making their mortgage payment can look out for this program where you can refinance to a conforming loan with a lower interest rate.