Update To The FNMA Higher Limit Conforming Loans

The initial program guidelines have been published for the
new "Conforming Jumbo" loans that FNMA will purchase above
the traditional $417,000 conforming limit and the new,
temporary San Diego limit of $697,500.

Here is a summary of some of the program parameters:

*Maximum Loan Amount: $729,750. San Diego's is $697,500.

*Loan Programs will include 15-year and 30-year fixed rate
loans and 5/1 ARMs (30-year loans fixed for the first five
years). The 5/1 ARMs will allow for interest-only payments
in the first 10 years.

*These loans must be originated by 12/31/2008 under the
current regulation. There is always a chance that Congress
may extend the time period, but there are no proposals to do
so at this time.

*Purchase loans can go as high as 90% Loan-to-Value (LTV) on
a primary residence. Up to 80% LTV requires a credit score
of 660 or higher, between 80%-90% requires a credit score of
700 or higher.

*Purchase loans on second homes or investor properties can be
included up to a 60% LTV maximum with a 660 or higher credit
score.

*Refinances can go to 75% LTV with a credit score of 660 or
higher on primary residences. They will not allow cash-out to
the borrower. Also, consolidation of any second loans into
the new first loan is not allowed. We would have to have the
existing second lender agree to subordinate their loan to
a second position behind the new loan, meaning that the
borrower will have a new first loan and the same second loan
after the refinance.

*Borrowers cannot have any late payments on their existing
mortgage in the last 12 months.

*All loan packages must be full documentation providing proof
of sufficient income and assets to qualify. "Stated income"loans
are not available.

*Property types can include single-family homes, planned unit
development units and condominium units that meet condo
guidelines.

When the announcement was made that FNMA was expanding their
loan purchase amounts as part of the Stimulus Package, we
were all hoping that many of the loans between $417,000 and
$697,500 would be able to improve their situation with tradtional
conforming interest rates and fees.

We are finding that the rates for these "Conforming Jumbo"loans
are being priced higher than the conforming loans, but
not nearly as high as the jumbo loans have risen.

Before the Subprime Crisis and the lack of performance of the
mortgage pools that investors had purchased, the spread
between conforming loans and jumbo loans was only about
.25% to .50%. In other words, if conforming loans were 5.5%,
jumbos were about 6.0%.

Because the investors have no confidence in the quality of
the mortgages that they are purchasing, the spread now between
conforming and jumbo loans has been about 2.0% to 2.5%.

Based on today's pricing with one of our major lenders, conforming
loans were at 5.625%, conforming jumbos were at
6.5% and jumbo loans were at 8.125%. All of these were with
a loan fee of one point.

We are fully expecting some of these guidelines to change
as the lenders/invetors discover the level of risk that they
are willing to accept. If they get too many requests in a
particular category, we may find that they cut back. If they
find that response is less than expected, they may loosen up
the guidelines to accommodate more borrowers.

If you are one of the borrowers that fall in the new loan
limit category, or if you know of others that need to find
out what they can do, please get in touch with me. It is
important to take a look at every request individually and
to research it in light of the current guidelines (and as
they may change from time to time).

That is the only way to make sure that we are not making
assumptions that may cost you the opportunity to improve
your situation.