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FHFA: GSEs Cut Into Jumbo Mortgage Market

*_Correction: Figures valuing 55 percent of HCJMs as 50,000 mortgages worth over $30 billion, reflecting 2010 figures from FHFA's Mortgage Market Note, have been removed; $650,500 has also been changed to $625,500._*

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The ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA) released research on Monday indicating a greater-than-expected drive to high conforming jumbo mortgages (HCJMs) by ""Fannie Mae"":http://www.fanniemae.com/ and ""Freddie Mac"":http://www.freddiemac.com/, raising questions about the long-term impact their buying spree may have on private markets.

According to the research, the government-sponsored enterprises walked away this year with approximately 55 percent of HCJMs in 10 of the nation's high-cost counties.

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On average, HCJM loan balances fall between $625,500 and $729,500, traditionally making these properties hot commodities for private investors.

Of the 10 counties under review, according to ""_National Mortgage News_"":http://www.nationalmortgagenews.com/, FHFA researchers Ian Keith and Paul Manchester said that ""HCJMs accounted for 3%-8% of [all] mortgages originated in 2009 and 5%-13% of the total dollar volume of mortgages originated, with the highest shares in Fairfield County, Conn.""

The researchers attributed the buy-up to Congress, which artificially raised the ceiling for GSE-purchased loans to $729,750 in localized areas with above-average median home values. Reports from Washington signaled that private investors will again have the edge on the market when the Obama administration allows the loan limit to expire in September, returning to $625,500 for affected areas.

As for the overall impact, Keith and Manchester held that a return by ""Fannie"":http://www.fanniemae.com/kb/index?page=home and ""Freddie"":http://www.freddiemac.com/ to past borrowing limits would yield only a ""modest"" change for the GSEs, with only a ""small"" number of borrowers in approximately 250 counties with HCJMs facing higher financing costs as a result.

If the Obama administration allows the expiration, then jumbo loan investors will reap the most benefits in Los Angeles County, where a reduction in the GSEs' loan limits would require that the investors increase their dollar volume by approximately 50 percent.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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