WASHINGTON, Feb. 4 (UPI) -- Federal guidelines are putting a high hurdle in place for lenders of jumbo loans -- mortgages above $625,000 -- industry experts say.
A temporary $729,750 cap on conventional loans ended in December, dropping to $625,000 the limit at which government-sponsored enterprises the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association could purchase jumbo loans from lenders, USA Today reported Wednesday.
That means lenders have to hold onto loans of $625,000 or more and, subsequently, cannot offer lower interest rates for the more expensive houses.
"You're looking at modest, middle-class homes. Why are they being punished? It's an issue of fairness," said Lawrence Yun, chief economist at the National Association of Realtors' chief economist.
With interest rates up to 2 percent higher than conventional loans "the effect is that jumbo loans are tumbling," he said
High priced markets with median prices near $600,000 are finding lending "extremely difficult" to find Tony Petruzzella, managing director of Veritas Financial in San Francisco said.
"There are no lenders willing to do any 30-year notes above this loan limit of $625,000," he said.
