Another day, another demand-side stimulus for the housing market.  Huzzah. 

In the sprawling 407-page stimulus bill, nestled in on page 111, Congress authorized a reinstatement of 2008's temporary conforming loan limits.  Effective immediately, home loans in high-cost areas can be insured by Fannie Mae or Freddie Mac up to $729,750.

"High-cost" means exactly what it sounds like.  A high-cost area is one in which homes are relatively expensive versus the rest of the country.  Cities like Arlington, Aspen and Maui come to mind.  Los Angeles and New York, too.

For homeowners in these areas, the standard conforming loan limit of $417,000 doesn't apply.

The definition of "high-cost" doesn't end there, though.  Different from the 2008 implementation in which sale prices across a county were used to identify high cost areas, the 2009 edition gives discretion for "sub-areas".  This is a hugely important piece of the bill -- especially for people in Chicago.

See, the Chicago Metropolitan Statistical Area includes the triangle of Chicago-Naperville-Joliet.  For all of the high-cost homes in Lincoln Park and Lakeview that would pull up the median sales prices of the region, there are low cost homes on the south and west parts of the city to pull it down, rendering all Chicagoland homeowners ineligible for the jumbo-conforming loan limits.

The same goes for Lake County, Illinois.  Because expensive North Shore homes are outnumbered out by inexpensive homes in the rest of the area, towns like Lake Forest and Northbrook were left out from the 2008 plan.

But now, because the government can legally separate Chicago into sub-areas that defy regional trends, thousands of homeowners can be suddenly eligible for low-rate conforming home loans.  This is a big deal because as mortgage rates have fallen, home buyers in Highland Park, Kenilworth, and Gold Coast have been forced into the more expensive world of Jumbo Mortgages. 

In Cincinnati, the same could be said of Indian Hill.

Now that sub-areas are eligible for high-cost treatment, we can expect demand for new homes to rise because -- in relative terms, at least -- home financing will be Sofa King cheap.

The loan limit reinstatement to $729,750 is another positive development for the housing market.  So much of its ills have been tied to falling home prices and this is just one more way for the government to spur demand.  Combine this action with the $8,000 first-time home buyer credit, Fannie Mae's re-uppance to 10 properties per person, and the ongoing foreclosure moratorium and you can practically predict how the Supply and Demand curve is going to shift.

The government hasn't yet defined which sub-areas are high-cost and which are not. 

For more information about this, give me a call.  Gary Bussard, Envoy Mortgage 314-993-6690.

Up from $625,500 to $729,750, homeowners in high-cost areas have a better chance of accessing today's low mortgage rates and that is good for both housing and the economy.

Areas designated as high-cost, though, are categorized as such for a reason.

Despite the hundred-thousand-dollar increase to conforming loan limits, there are still plenty of American homeowners in high-cost areas whose home loans remain too big for Fannie Mae to insure. Traditionally, we've called these out-sized loans "jumbo mortgages", or "super-jumbo mortgages".

Over the past few years, jumbo mortgages were bought and securitized by investment banks, hedge funds and other financial firms.  This helped keep rates low. 

Today, however, and as anybody shopping for a jumbo loan can attest, the dearth of both private and public investors has made getting an out-sized loan an extremely expensive proposition.  Rates on jumbo mortgages have been downright awful compared to its conforming-mortgage cousin.  Not to mention significantly higher loan fees.

Thankfully, there is a choice -- it's just not one you may have thought of.

See, the terms "jumbo" and "super jumbo" -- these are words used to describe Wall Street-bound loans and if we look beyond Wall Street, we find local banks that are happy to lend to people in need of money.

And different from Big Banks, local banks tend to keep their loans on the books, giving them permission to draw their own mortgage playbook, separate from what a Fannie Mae-bound loan requires.  We call these mortgages "portfolio loans" and if you've never seen one, the guidelines can look a little weird.

• PMI typically not required above 80% loan-to-value
• 100% of funds needed at closing can be gifted from anywhere
• Closing within a LLC or other corporation is permitted

The good news for jumbo mortgage holders, though, is that portfolio lenders are killing what the likes of the Big Banks have to offer. 

For example, I'm currently quoting a $1,500,000, 7-year ARM at 5.125 percent (APR 5.221).  I tried to shop the same product at a few Big Banks -- none would even consider the loan, let alone try to price it.  And, there are plenty of other examples like this, too. 

• $1.5 cash out mortgage with 60 percent equity, primary residence
• $2.0 million mortgage at 65 percent LTV, primary residence
• $3.0 million mortgage at 50 percent LTV, vacation home

None of these mortgages would be approvable through the likes of Chase, Bank of America, Citibank, or Wells Fargo.  It takes a niche lender to get it done. 

Finding niche lenders isn't always easy, but it can be worth the extra effort.  Mortgage rates are often lower, downpayment requirements are often smaller, and the underwriting process is often smoother.  As a mortgage broker, I work with a lot of them.

Please call me with any questions regarding these Jumbo and Super Jumbo loans, or any loans for that matter and I will be more than happy to assist you.  Please call me at

(314) 993-6690,  Gary Bussard, Envoy Mortgage.  Thank you!!

With both consumption and household income down last month, it's as good a time as any to rerun this graphic from November.  That Great American Penny-Pinch is making deflation as real a threat to the economy as inflation is. 

The difference, though, is that deflation can be good for mortgage rates.  Inflation rarely is.

Remember that Rates are still below 5%!! Please give us a call.  (314) 993-6690.