Jumbo mortgage deadline looms
By Holden Lewis • Bankrate.com

Some mortgage borrowers are about to get squeezed by the shrinking of something called the jumbo conforming limit.

In the country's priciest housing markets, including Los Angeles, San Francisco and Washington, this year-end change means that borrowers need to act fast if they want to get a home loan between $625,500 and $729,750. A similar change affects other areas, too, but not necessarily with the same dollar amounts. The change in the jumbo conforming limit affects purchasers as well as refinancers.

Time is of the essence because it takes a few weeks not only to process a loan from application to closing, but to sell it on the secondary market after closing. At this late date, it's better to skip the middleman and apply directly with a lender instead of through a mortgage broker.

Some lenders wanted these loans to be closed by mid-December or even earlier. Bank of America's deadline was Nov. 13 for a rate lock under the 2008 loan limits. Citi's deadline was Dec. 9.

But some lenders might still be accepting applications. Matt Hackett, underwriting manager for Equity Now, a New York-based direct mortgage lender that does business in 17 states, says his company can close jumbo conforming loans through Dec. 31. A spokesman for Chase says it will accept rate locks all the way to Dec. 31 for loan closings early next year. Told that this sounded hard to believe, the spokesman insists it is true.

Why conforming is good
Until this year, mortgages could be divided into two categories defined by loan amount. Mortgages for $417,000 or less were within the conforming limit, meaning that they potentially were eligible for sale to Fannie Mae or Freddie Mac. Anything over $417,000 was a jumbo loan and ineligible for sale to Fannie or Freddie. The distinction matters because jumbo loans have higher rates. Since the credit crunch began 15 months ago, jumbo rates often have been more than a full percentage point higher than conforming rates.

As part of the economic stimulus package this year, Congress adopted a new, in-between category of mortgage for a few dozen counties where houses are most expensive. It's called the jumbo conforming loan, and the limit varies by county.

In the priciest places, such as Los Angeles, the jumbo conforming limit was raised temporarily to the maximum possible of $729,750. In other counties, where house prices are high but not as high as in L.A., the jumbo conforming limit is less. In Boston, it's $523,750; in Philadelphia, it's $420,000. And in most counties, where houses are more reasonably priced, there are no jumbo conforming loans, and the line between conforming and jumbo remains $417,000.