Reducing The Size Of Federally Guaranteed Loans

Awkwardly and inconsistently, the federal government is reducing its role in the mortgage market.

This will make some traditional mortgages, particularly jumbo mortgages, impossible to obtain. It will make the remaining mortgages more expensive and more demanding to obtain.

Overall, a reduction in government intervention into the mortgage market will allow the market to work more efficiently.

The reduction in jumbo loan guarantees will particularly effect pricey housing in New York and California.

The New York Times reports:

FOR most potential buyers, the impending change in mortgage limits is just another obscure wrinkle in federal policy. But for some New Yorkers, it could mean the difference between buying and not buying a new home.

On Oct. 1, when the limit on federally guaranteed loans drops to $625,500 from the current level of $729,750, hundreds of buyers in the city and nearby suburbs will either have to come up with larger down payments to stay under the new limit or face the prospect of applying for jumbo loans — anything above $625,500 — which have higher interest rates.

For some buyers, neither option will be viable, and they have set Sept. 30 contract deadlines in hopes of closing on their new homes before the change kicks in.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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