Remember how we were told that raising the conforming limits would help higher priced markets?  It doesn’t seem to be working:  [Thanks G!]

The New York Times reported on Wednesday that there are real problems with the jumbo mortgage aspect of housing rescue.

Several months ago Congress, in an attempt to loosen up credit in costly markets, raised the loan limit on loans which could be backed by government-sponsored housing finance agencies such as the Federal Housing Administration from $417,000 to amounts up to $730,000, depending on location. The change was intended to reduce rates for more borrowers (jumbo loans have always carried a higher rate than conventional loans, i.e., those below the loan ceiling) and to stimulate lending. The goal was not aimed at helping subprime borrowers but was aimed at credit-worthy borrowers with acceptable down payments who wanted to refinance or purchase a home in expensive housing markets like San Francisco or New York. It was thought that helping thousands of borrowers access billions in new loans would stimulate the housing market, spur consumer spending and possibly avoid or at least reduce the effects of a recession.

Instead, Matt Richtel, reporting in the Times says the effort to make it easier to get jumbo mortgages has yielded frustration and disillusionment. Since the rules took effect April 1, many borrowers and their mortgage brokers say the new loans are either not available or the rates are far higher than they expected.

Richtel quotes the president of one mortgage corporation as saying that the program "is so much of a failure that it’s really unbelievable..Like coming up with a vaccine to a terrible disease, and then not giving it to people, or making it too expensive."

This is good news for the American taxpayer, who won’t have to guarantee loans that aren’t being made.  As for Congress, it looks like business as usual- another day, another useless bailout.