Increase in Conforming Loan Limits

It now appears that those jumbo loans which are made under the new higher loan limits to be established by the Dept. of Housing and Urban Development (”HUD”) will be combined and marketed as separate pools of mortgage-backed securites by FNMA, separate from those loans made under the prior conforming loan limit of $417,000. If this occurs, the interest rate for these new “conforming” jumbo loans are not expected to be the same as for current conforming loans, as they are expected to trade at higher interest rates due to their perceived higher risk profile.  The current spread between conforming loans and jumbo mortgages is approx. .84%, but early hopes that the new higher loan limits would provide much lower interest rates for the new higher loans made is fading, and that there will still be a substantial spread between the old conforming loan limit of $417.000 and the new higher conforming loan limit loans, although it should still be less than the current spread between conforming loans and jumbo loans.