A Reconsideration of the Jumbo/Non-jumbo Mortgage Rate Differential
Consistent with a series of recent papers, the interest-rate differential between mortgages eligible for purchase based on loan size by Fannie Mae and Freddie Mac and larger loans is estimated to be 22 basis points over the 1986-2000 period. This differential averaged 19 basis points for the 1996-2000 period. Other significant effects include: loans slightly above the conforming loan limit and originated late in a calendar year often have a lower rate that nearly fully anticipates their likely characterization as a non-jumbo loan after the conforming loan limit is indexed effective each January; loan-to-value ratios affect jumbo loan rates much more than they affect non-jumbo loan rates; loans located in non-metropolitan areas have a 3 basis point differential versus loans in metropolitan areas that is surprisingly small given the likely higher cost to service non-metropolitan loans and the higher degree of uncertainty about non-metropolitan collateral values; and estimated regional mortgage rate differentials have narrowed through time. Copyright 2002 by Kluwer Academic Publishers
When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:25:y:2002:i:2-3:p:197-213. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.