As the subprime mortgage mess spreads to homeowners beyond those with poor credit ratings, jumbo mortgages are under particular pressure, the New York Times reports.
An investment banker recently purchasing a $1.5 million home saw the interest rate spike from 8% to 13% in just three days. The rate for these mortgages is now higher than the rate for conventional 30-year mortgage.
Jumbo loans are those larger than the $417,000 limit on what Fannie Mae and Freddie Mac are allowed to buy, and the private market for mortgages securities has dried up. Particularly affected are the two coasts, where home prices are highest. “In California it has shut down the purchase market,” a Bay Area broker reports.