Blue State Jumbos

Kathleen Pender in her Net Worth column in the San Francisco Chronicle recently penned an article with an interesting perspective.  She examines how the change of political parties in power in D.C. might result in an increase the loan limits of “conforming loans” that qualify for purchase or guarantee by the loan behemoths Fannie Mae and Freddie Mac.  This would be good news to people seeking mortgages in areas with high priced homes like the San Francisco area where the median home sold sells for $749,000.  This is because conforming loans can be had for a lower rate than Jumbo loans which aren’t backed by Fannie and Freddie and cost one-quarter to one-half a percent more. 

What’s happened over the years is the current loan limit of $417,000 has not kept up with the vaulting values in several blue states such as California, New York and Massachusetts. Red states such as Mississippi, North and South Dakota, Montana, Iowa etc. haven’t faced such a problem – their comparatively lower average home values don’t necessitate getting into Jumbo territory.

Last year the House passed a bill that would permit Fannie and Freddie to raise their conforming loan limits in high cost areas, but the Senate didn’t approve it.  With a different composition of political parties soon to be entrenched, there may soon be a different outcome.


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