Big expensive homes have been hard hit by the housing crisis.
Fannie Mae and Freddie Mac have limits on the expenses of homes whose mortgages they guarantee.
Some of those owning these expensive homes have been able to refinance to lower rates.
Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for, say, five years and then adjusts annually. Kelly’s new loan is a five-year hybrid adjustable identical to his old one, except that he’s paying about 5%, down from 6%.
Banks are also relaxing slightly some of their requirements for jumbo loans. That’s an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn’t being propped up by Uncle Sam.
The lower rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That’s because, by definition, jumbos are too big to be bought by Freddie Mac and Fannie Mae or to be insured by the Federal Housing Administration. Plus, the private market for mortgage-backed bonds dried up when the meltdown hit. So lenders making jumbo loans these days must be willing to take the risk of keeping them in their portfolios.