jumbo loan limit on coops

the conforming loan limit was raised to over $700K by the temporary guidleines earlier this year, now to be superseded by theis new lower limit. it had zero effect on the market because no one is buying the paper. The MBS market is in hibernation.

Why would it matter whether this loan applies to a coop? Wouldn't a jumbo be determined by the same criteria regardless of whether it's a coop loan or condo mortgage?

not certain what you mean but coop mortgages are generally subject to higher interest rates than condo mortgages due to ownership issues.

The temporary limits earlier this year specifically did not apply to coops per other posts on this site . I hope the new permanent limits do apply.

uptowngal- I agree, a jumbo should be determined by the same criteria regardless of whether it's a coop loan or condo mortgage but often is not because you are buying shares of a corporation as opposed to real property.

Coop mortgages are generally riskier than condo mortgages because the building often already has an underlying mortgage. Your coop mortgage is on top of this senior obligation. That is also one of the reasons that the maintainance is higher on coops than condos - part of your maintainance is going to pay the underlying mortgage on the building. Bottom line: lenders see coops as more leveraged investments than condos in general. (Obviously, there are some coops that have fully paid off their underlying mortgage, but that is more the exception than the rule.)

I think this is what you're asking: What is the bottom line for all the talk about "jumbo" coop loans lately? You have to start with the way it was. Non-jumbo loans are also known as conforming loans. These loans "conform" to the purchase requirements of SallieMae/FreddieMae or something so the bank you get the mortgage from can resell it to these entities. Because they can be resold as within the conforming loan guidelines, the interests rates charged end up being lower than non-conforming loans. The maximum amount a conforming loan could be until recently was $417,000. Any mortgage above $417,000 was considered a non-conforming loan, or "jumbo loan." Because of the more limited ability of lenders to sell these loans, they were more expensive for consumers--that is, they carried higher interest rates (I'm not a finance guy--that explanation is as much as I understood). With the credit crunch, in order to help people still obtain large loans to buy homes, the law was changed to raise the conforming loan limit to something around $700,000. People thought that they would be able to get these larger conforming loans for the same relatively lower interest rate that previously only loans under $417K enjoyed.

In practice there were and are hitches. First, the new law included condos but excluded co-ops (which unilke most places, NYC has tons of). A hue and cry went up and eventually the higher limit was extended to coops. Great. But did these "conforming loans" for larger amounts of money really cost the same as old conforming loans thus helping people a little bit to buy by freeing up credit a tad? Not really. The higher loans under the new rules came with things like mandatory points or the equivalent you had to buy to get the loan. when all was said and done, the interest rate was still higher than loans under $417,000 despite the new law.

That's the best I can explain it. I'm sure someone will jump in and say it more eloquently and/or accurately, but the bottom line is that the new lending laws did not exactly transform the lending landscape in a practical way for NYC coop purchasers.

Bottom line is that the current conforming limits are 417k. It will be permanently raised to $625,500 on Oct. 1. There is a temporary conforming limit of $729,750 which good only until the end of this year. Rates are a tad higher. The spread is about .125% in the rate which isnt bad if youre borrowing 700k as opposed to 417k. Of course its frustrating if youre borrowing 450k and have to deal with the .125. Although both are considered conforming loans (417k vs. 729,750), underwriting guidelines are different. As far as Coops goes, the new higher loan limit doesnt not apply to Coops. However, the new permanent $625,500 should. In no way did I say this more eloquently but these are the facts. sunny_hong@countrywide.com

I think that's wrong, Shong. Wachovia, for instance has given "conforming" coop loans in NYC that are above $417K. I think some banks are, but not all. Not sure how this is working.

Wachovia may be offering coop loans above 417k but it really isnt "conforming" to fannie mae guidelines. Theyre probably just holding it on their books. Its probably their own program and not the traditional conforming.

I see. It's an example of why I keep telling people to use any contacts with friends, family, work contacts or colleagues to get in touch with the wealth management, or private banking, or similarly named VIP divisions of lending banks. These offer better deals very often and when you are talking about amounts you may pay for up to 30 years, a little less each month really adds up. Within these VIP units of banks, fees are often lower or waived for things like appraisers and similar closing costs, the bank may agree to pay part of point(s) you elect to buy to lower the rate, and the degree of service can be way better. You don't need to be Donald Trump to use these units if someone a unit does a lot of business with asks them to help you out too.