Fannie Mae's Jumbo-Conforming Loan Guidelines

I started this post with the plans of announcing the pricing for the Jumbo-Conforming mortgages…however, I just don’t have enough facts to do so yet. It looks like Fannie Mae’s add to rate is 0.25%…however, lenders will most likely have their own add to rate as well. (So far, I’ve only seen a jumbo-conforming rate from one lender which was in the high 6 range for a 30 year). As soon as I have more data, I’ll let you know.

Here is some basic information from Fannie Mae regarding temporary Jumbo-Conforming mortgages (loan amounts from $417,001 – $567,500 for King, Pierce Snohomish Counties):

Purchase Mortgages/Principal Residence
Fixed Rate: Max LTV/CLTV 90%. Minimum Mid-Score LTV>80%: 700 / LTV = or <80%: 660.
ARMs: Max LTV/CLTV 80%. Minimum Mid-Score: 660%

Limited Cash Out Refi (Limited cash out means you can recieve a maximum of $2000 cash back at closing).
Fixed/ARMs: Max LTV 75%/Max CLTV 95%. Minimum Mid-Score: 660
Cash out refinances are not eligible (this includes paying off a second mortgage with a refinance, which is considered “cash out”). Update 4/7/2008: Fannie Mae just issued clarification on this guideline: they will now treat paying off a purchase money second as a limited cash out refinance.

*Full doc only.
*2 months reserves (PITI) are required for primary residence.
*45% maximum DTI ratio.
*ARMS are qualified on the fully amortized PITI at the higher of the note rate or fully indexed rate.
*Limited to four financed properties, including the borrower’s principal residence.

Remember, this coach turns back into a pumpkin on December 31, 2008.

Lenders will start pricing “jumbo conforming” anytime…stay tuned!

90 thoughts on “Fannie Mae's Jumbo-Conforming Loan Guidelines

  1. When I first saw the guidelines I assumed they’d work nicely to help people refinance adjusting ARMs. Somehow I missed the fact that the loan couldn’t be used to pay off a second. Isn’t this a pretty big deal given that most people looking to refi have a piggyback?

    Any idea how the new FHA jumbos will compare?

  2. laxtosnoco –
    I’m surprised about the no-cash out refi too. Plus with regular conforming (loans 417k and under) if the second mortgage is from when the borrower purchased the home, it’s not considered as “cash out”. From what I understand, with the “jumbo-conforming” it is considered cash-out. Conforming jumbos may be more helpful for purchases for the consumer and for Wall St.

    I’m thinking FHA jumbos may be more beneficial for homeowners. Currently, FHA allows up to 95% LTV for cash out refi’s with no add to rate.

  3. Interesting. So if many refis are out (because of the 2nd), I wonder who the real target customer is. How many first time buyers are there left in Seattle that have $55k+ in cash for a down payment and 700 credit scores?

    Perhaps the most likely candidate for the Fannie jumbo are trade up buyers with high, documented incomes?

  4. Full doc only (guess Fannie’s learning a lesson).

    I do believe this is more for Wall Street…this is retroactive to July of 2007.

    Also there are buyers in that market who have more cash for down payment…those that don’t have the down may opt for FHA (once we see what those guidelines are).

  5. The Fannie Mae limits are very curious. Probably wise on their part. Don’t know how much this will “stimulate” the economy.

    Those that were waiting for a less expensive debt consolidation refi will be sorely dissappointed.

    FHA may be the better alternative. I just received a notice that there are no guideline changes or hits to the FHA increased limits, though I expect a fair amount of sticker shock when the Jumbo borrower is facing the Upfront Mortgage Insurance Premium (almost unrecoverable) fee of 1.5%, in addition to the standard closing costs.

    On a $550K Jumbo loan that’s $8,250 for the UFMIP. Doesn’t seem like so much money when you are doing a $250K mortgage.

    Gotta chew on these numbers for a while. Thanks for the post.

  6. Roger-

    The Fed today announced a $200BN, 28 day asset swap to prime dealers. Basically, prime banks who have a large inventory of AAA RMBS securities can swap for Treasuries at a decent spread. They can then turn around and Repo out the Treasuries at better financing costs.

    I think the Fed finally is realizing that rate cuts are not having the same impact they used to. More “stimulus” actions like these can hopefully temper the over-correction in Mortgage Land.

  7. Q-Diddy…I deleted the dupe…you’re just trying to emphasize your point! πŸ˜‰ This move does seem to have more impact than the rate cuts. Mortage rates (MBS) are responding better as well. This is a facinating (and sometimes maddening) market.

  8. Q-Diddy:


    This explains the improvement in pricing this afternoon (by about .125% to rate). Not often that you see the stock market do so well, and mortgage rates improve in the same day!

    That’s one big giveaway! Swapping untradable RMBS for highly tradeable Treasuries, at little to no cost!

    Where am I when these kind of deal become available? πŸ™‚

    I found this rather intriguing article about the mortgage and banking situation, I’m not sure how on base or on topic it is, but it seemed relevant and coherent to me.

    BTW, if anyone knows how to make links posted here more attractive, I’d take the time to learn.

  9. I found the rate on and it seemed too good to be true at zero points. So, I called them and they confirmed it. If you go to and do “compare” it shows up.

  10. Will, don’t believe everything you see on bankrate. I checked Metlife’s website and they’re not offering that rate. You need to contact Metlife, get a Good Faith Estimate that will detail the costs associated with having that rate and if if you still want the loan and they have the rate, lock it (lock it allowing enough time for closing).

    Good luck.

  11. Will:

    All interest rates are meaningless without the costs.

    Here’s an example (not an offer to lend or a quote!!):

    Will, I can get you a loan of $1,400,000 at 5% interest! Do you like it? Great!

    The loan costs are only $140,000. Do you like it now?

    If a lender quoted you a rate without a cost or an APR rate, the lender is in violation of the law. An APR rate quote is sufficient to be in compliance, since it is an indication of some of the loan costs (including points, but exluding some other third party fees), but a poor way to shop, since half the LO’s couldn’t tell you what it means, and nearly no borrower knows what it means.

    ALWAYS look at costs, before the rate.

    And yes, it does STGTBT.

    But, if it is true, get a full written quote with GFE, lock the loan, insist on a faxed verification of the lock, and hold on for dear life.

    Good luck!

  12. I’ve heard from one of the reps I work with quite a bit that they should have true pricing for the jumbo-conforming on Monday (a little extra green for St Patty’s day). She cautioned that it’s probably not going to be what consumers are hoping for–possibly between jumbo and conforming now. She was in conference today and also said that FHA will most likely be a better option…like Roger said, this means upfront and monthly MI–EVEN IF YOU’RE PUTTING 20% DOWN.

  13. Roger, the Metlife quote had an APR of 6.01% and costs of $1040
    I actually did a “live” chat with one of their representatives and he told me it was a 6%, no points, 30 yr loan, 80% LTV loan. I told the rep that it seemed like a great reate and he replied “yes it is”. I have a 740 credit score, he said it may even be lower??

  14. Will:

    Let’s have a little fun.

    Send me documentation of a closed loan with those terms within the next 45 days, and I’ll send you a free gift.

    I hafta warn you tho, my wife says I’m cheap!

    Not so cheap that I won’t pay a little something to see an honest to goodness miracle!

    Metlife is also offering a 20 yr Jumbo at 8.206% APR, and a 30 yr fixed conventional at 6.55% APR. Both of those rates should be lower than your 30 yr fixed Jumbo with an APR of 6.01%, since they are at lower risk to the lender, and the conventional is more esaily securitized. The next best rates at Bankrate are at 6.883, 7.678, 8.018, and 8.789% APR for the 30 yr Jumbo. That should tell you something. We all draw water from the same well.

    There’s a rat in the woodpile. Probably Metlife made a mistake (which they will most likely not honor), or worse, made an intentional mistake to lure in business.

    Or, you just found the deal of the year, and you should buy 20, then re-sell them on E-Bay! πŸ™‚

    Thanks for the entertainment! Let’s take a look at their rates in the AM! By all means, lock it, if it’s there! Get me one, while you’re at it!

    BTW, I assume that you are serious and earnest, it’s just more fun to be a little playful, especially when it’s something like this.

    Truly, if it is there, and you can get it, and want it, take it. And if they renege, let all hell break loose! I’d love to help with letting hell break loose!!

  15. Will, I’d love to hear back if you do or don’t get the rate. I do hope it’s legit for you… I recommend taking your GFE with you to closing to make sure that the closing costs quoted at locking are the same at closing.

    Good luck! I might have to add a goody to Roger’s present. πŸ˜‰

  16. I try to stay out of these mortgage threads, but I just had to thank Roger for the laugh.

    “Send me documentation of a closed loan with those terms within the next 45 days, and I’ll send you a free gift. I hafta warn you tho, my wife says I’m cheap! Not so cheap that I won’t pay a little something to see an honest to goodness miracle!”

  17. Will:

    Their offer appears to be legit. I called them this AM.

    There is nothing else that I know of close to this rate and cost, at those terms. The market is around 7%

    I’m gonna hafta think real hard what the gift will be, but first, I have to call my broker to see if we can offer this, and if not, call some of my clients!

    I think I saw St Patrick on my french toast this morning! Waving!!! πŸ™‚

  18. I hope Will reports back to let us know how the transaction goes and if he closes with the rate. 1% difference in rate is very signficant at any loan amount so I don’t blame him for taking it. I’d like to hear (1) if he still has the rate at closing at the closing costs quoted (2) how their service was.

    If Will closes with his this rate or better at the closing costs on his GFE…I’ll throw in a prize. πŸ™‚ PS, I’m cheap too.

  19. Ardell:

    Thanks for the clap! πŸ™‚

    Why stay away from the mortgage threads? I think we could use some of your fiestiness!

    Not to be overly gooey, but I admired the way you dealt with a competitor recently with a business model much different than your own, on Tim’s post. The encounter appreared to be initially hostile, but in reality was not, just different styles and mores.

    Personally, I am fascinated by the formation of communities, both physical and meta-physical: what makes them form, how are conventions and ettiquette agreed upon, how do you attract promising members and reject candidates that are bad for the community?

    I watch, and learn…

  20. So, I have a question for the financial wizards that periodically grace this forum.

    When banks are desperately trying to securitize/sell their existing Jumbo loans (most of them VERY clean, at moderate risk levels, and at yields ranging from 6.25 to 8%), why would any lender go to the trouble of ORIGINATING a Jumbo loan that only paid 6%?

    Wouldn’t it be much easier and cheaper to buy an existing loan (or 1,000) with the same characteristics? That paid a higher yield? At a fraction of the labor cost?

    If someone would not mind helping with that, I’d feel much smarter today.


  21. Roger-

    Every bank has a different model to value their loans. Each bank thinks their models are right and some think they can be competitive enough to make a profit. Also, some banks choose to offer all products, while others try to specialize in a few.

    There are many popular burger joints that try to differentiate their products, but at the end of the day they’re still selling burgers. Businesses are as unique and alike as human beings. That’s my 2 pesos.

  22. Pingback: Major Credit Score Rate Adjustments — The Hits Keep Coming | Rain City Guide | A Seattle Real Estate Blog...

  23. Roger-

    Focus on the model. Each bank has a different market segment they target, they have different cost structures, distribution channels, marketing, advertising, originating parameters, view on interest rates, borrowing costs, risk profile, prepayment speeds, etc, etc. I can go on and on, but I hope you get the point.

    Just because they can buy it through wholesale,(other banks) doesn’t mean they truly understand or know about the customer of that particular loan. By originating in house they know the customer better and are more comfortable with the performance.

    That doesn’t stop them from buying through wholesale. In fact they still do when they pool their loans, but it depends on the price and again, whatever their model tells them the loan is worth.

    Hope that makes sense, but then again what do I know? I’m not a financial wizard, but I did stay at a holiday inn!

  24. Kary-

    Do you mean MSR? Mortgage Servicing Right? Yeah banks do originate for that, but they have to be able to sell their loans to do that.

  25. Q-Diddy, I’m a real estate agent, not a lender, so I was just taking a guess. But it just seems like there are a lot of different charges up front which are also a source of profit.

  26. Well, I’ve taken the first step and applied at Metlife bank. I have a GFE which has30yr, 6% rate, 1.4 mil loan, with 20% down. 0.025% points, 1800 appraisal fee, 500 origination. They told me that they know it is the lowest rate in the country and it’s because they put a special rate on it which will not last long. I will call and lock it tomorrow.

  27. Q


    You make sense, but there is still no answer that satisfies.

    I considered the quality of loan issue, but that still doesn’t account for that big of a spread.

    Why would their Jumbo 30 be less expensive than the conventional?

    I can be patient for the answers to important questions. The trick is figuring out which ones are important!

    Will, best of luck, thanks for reporting.

  28. Will, check for prepayment penalties. It will be marked on a small box on the TIL.

    I once had a client leave me for an “incredible” rate. He called me from the signing table because the mortgage banker left somehow forgot to tell his clients with high 700 credit scores that he had tacked on a prepay. No wonder he could offer such a sweeter deal. My client walked from that LO and returned to the transaction we originally had.

  29. I just received a memo that Fannie Mae is now treating refinancing a purchase money second (with the first) as a rate term refi instead of cash out (and not allowed) for jumbo conforming refi’s.

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