Thursday, August 16, 2007

A "Jumbo" credit crunch?

An ominous paragraph in today's NY Times article about Countrywide Financial's cash squeeze:

"In a statement released early today, the company also said that 90 percent of the home loans it will now make will be to standards set by Fannie Mae and Freddie Mac, the big purchasers of mortgage loans, because it is not able to sell them to other buyers. Less than two months ago, the company had said about 50 percent of its loans were eligible to be bought by the two government-sponsored agencies."

A lot is left unsaid in this paragraph, but my take is they're pulling out of the non-conforming loan business. Jumbo loans, widely used in DC, are non-conforming since they exceed the $417,000 limit set by Fannie and Freddie. Since Countrywide is "the nation's largest mortgage lender," accounting for 17% of all mortgage loans in the US, what does this portend for the ability to get jumbo loans in DC and, moreover, for DC's housing market?

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