The New York Times reported a trend with potentially alarming repurcussions for the townhouse market (and some of the pricier condos coming to market) in Brooklyn: Upward pressure on interest rates for jumbo loans. The article leads with the example of one guy who was quoted 8 percent one day and then three days later, when he went back to lock in the rate, the number had leapt to 13 percent! This is atypical, to be sure, but the spread between regular mortgages and jumbo mortgages has expanded from about 25 basis points a few weeks ago to about 70 basis points now. (According to Bankrate, most lenders are quoting between 7 and 8 percent for zero-point 30-year jumbo loans.) What’s going on? Regardless of the creditworthiness of the borrower, it appears that the implosion of the subprime market has reduced the market’s appetite for even higher-credit mortgages on amounts above the $417,000 level that Fannie Mae and Freddie Mac are restricted to buying. We’ve got a couple of questions: 1) Are there any readers who’ve tried to get a jumbo loan in the past week or two? 2) If this persists for more than a week or two, what does it mean for the Brooklyn market?
In a Credit Crisis, Large Mortgages Grow Costly [NY Times]