US Rep. Barney Frank (D-estroying the economy), says that he wants jumbo loan limits to be raised again - to the previous level, if not higher
The Federal Housing Finance Agency recently recalculated the loan limits for 2009, as required by law, based on recent home sales.
That resulted in the jumbo limit for the Boston area being lowered to $465,750, meaning some borrowers who would have qualified for lower rates in December are now back in the jumbo category.
US Representative Barney Frank, Democrat of Massachusetts, said Friday that he wants jumbo limits to be raised again - to the previous level, if not higher.
Frank, chairman of the House Committee on Financial Services, pledged to include a provision for this in the economic stimulus bill Congress is expected to take up with President-elect Barack Obama. He also wants to change the way the loan limits are calculated to reflect real market conditions.
"Even if you accept the principal we shouldn't be financing luxury housing; what's a luxury house in Nebraska is an average house in Quincy," Frank said. "I'm lobbying hard to get at least last year's level to be put back where it was."
Meanwhile, borrowers in jumbo territory are scrambling to avoid paying high-interest rates.
Kerry Scarlott, 46, and his wife, Rebecca, 44, are refinancing the jumbo mortgage on their Hingham home with two smaller loans: a jumbo conforming loan at about 5 percent, with the balance covered by an adjustable-rate home equity loan, currently at 4 percent, which they intend to pay off as soon as possible.
"The jumbo rates were pretty atrocious," said Kerry Scarlott, who has been looking to refinance for about a year. "The key for us has been in staying involved in what is happening in the market and knowing when these opportunities come up."
Some lenders are offering competitive jumbo rates; many are smaller banks and credit unions that hold the mortgages, and so don't have to deal with higher prices in the secondary market.
One is South Shore Savings Bank, which through its Hingham-based mortgage company, Cambridge Mortgage Group, is offering jumbo loans at 5.875 percent. Even so, John Battaglia, the mortgage firm's president, said he still hears from disappointed customers who expected to lock in at even lower rates.
"People will look and see and say: 'Hey the rates are 5.25.' And they do get excited until they hear the rate for a jumbo," said Battaglia. "There's a lot of people out there with a higher balance."
Chris Shedd, a Wellesley mortgage broker, said he tries to avoid quoting "ridiculously high" jumbo rates.
On Friday, he said one lender was offering a 5.25 interest rate for conventional loans, 5.75 percent for conforming jumbos, and 8 percent for jumbos.
"In Wellesley, sadly, it's just frustration," Shedd said. "They don't understand why there is such a big difference. Anybody who has a jumbo loan, they are usually very good clients and are thinking 'Why not me?' "