In spite of government efforts to make jumbo loans more affordable, prices remain high- and Barney Frank wants to know why:
Capitol Hill’s most influential legislator on housing issues says Wall Street and the mortgage lending industry are needlessly overpricing "jumbo" loans designed to help borrowers in areas with high home costs.
Barney Frank, chairman of the House Financial Services committee and chief author of legislation that raised the maximum mortgage limits of Fannie Mae, Freddie Mac and FHA to $729,750 through the end of the year, plans to haul officials of major mortgage firms before Congress next week to explain why interest rates and fees for new jumbo loans are so high.
"I am disappointed," said Frank. "We fought very hard to raise the loan limits for Fannie and Freddie and there have been a lot of problems in implementation.
As part of the federal economic stimulus law, higher limit jumbo loans have been authorized since April 1. But only a relatively small number have been funded. That has prompted criticism from groups such as the National Association of Realtors, who expected to see sales stimulated in California and along the East Coast by the more generous mortgage ceilings.
There were high hopes in Congress that raising the conforming limit would stimulate the housing market in higher priced areas, but it hasn’t been working:
Congressman Frank thinks those rates are scaring away potential buyers and refinancers. Mortgage industry experts say investors are simply being careful - requiring higher returns for financing big loans in areas where they believe property values could fall further.
Frank rejected the claims of investor caution. "There is a chain of people blaming each other," he said, "and we’re going to call in everybody and find out why."
Fannie and Freddie are coming to the rescue though:
