Stimulus legislation brings new jumbo loans

Minimum 40 percent down payment and 660 FICO for second homes and investor properties.

No balloon or negative-amortization payment terms allowed.

Household debt-to-income ratios cannot exceed 45 percent.

Freddie Mac announced similar standards, but wants minimum 700 FICO scores on any loan with less than 25 percent down.

Don't expect interest rates on the new super-sized conforming jumbos to be anywhere near competitive with smaller mortgages, either. Besides higher base rates, there are add-on charges in "declining" markets that can push final note rates beyond 7 1/2 percent in some cases. Many areas tagged as declining are in the former housing boom markets in California and the Eastern seaboard where jumbos are most common, and most needed.

For example, in Naples, Fla., the first batch of conforming jumbos available in late March came with base rates of 6 7/8 percent, according to brokers, but with the declining market and other adjustments, the final rate to some borrowers came to 7 7/8 percent.

William Dukes, senior loan officer for Summit Home Mortgage Inc. in Naples, said that a local borrower with a high FICO score, a 20 percent down payment and solid income and assets could get a $400,000 first mortgage at a fixed 5 5/8 percent. But the same applicant seeking a new $500,000 Fannie Mae/Freddie Mac conforming jumbo would pay well over 7 percent after add-ons.

Dukes said the rates on the new jumbos "are surprisingly high" compared with loans under $417,000. Traditionally the spread between conventional loan rates and jumbos was about half of a percentage point.

"I don't know what [Congress] is really accomplishing here," he said.

Paul Skeens, principal broker at Carteret Mortgage Corp. in Waldorf, Md., disagreed, arguing that some pricing on the new jumbos is attractive.

"You can buy a $700,000 house with 3 percent down with a [30-year-fixed] rate of 6 1/2 percent right now" in the Washington area, Skeens said, "and that is really an amazing deal."

kenharney@earthlink.net.