This past Sunday the Federal Treasury stepped in and took necessary and important steps to shore up Fannie Mae and Freddie Mac, the two government sponsored enterprises (GSE’s) that have securitized nearly half (roughly $5 trillion) of all mortgages in the United States.  Monday, interest rates on conforming loans dropped to under 6%.

However, don’t expect rates on non-conforming Jumbo loans (used almost exclusively in Saratoga, California and other high priced areas to purchase a home) to follow suit.  Interest rates on non-conforming jumbo loans are currently over 7% and will probably go up!  In my opinion, this means that now may be a better time to be a homebuyer in Saratoga (in terms of the cost of a jumbo mortgages) than in 2009.

John Shapiro of Private Mortgage Advisors told me today that “Jumbo pricing will not see any relief until we see a clear end to home price decline.  A robust secondary market for Jumbo loans will not come back until there is less risk in the housing market.”