Jumbo headaches

Events of the past few weeks confirm that our real estate woes are not limited to the subprime market. The latest casualty seems to be mortgages in excess of $417,000, the so-called “jumbo mortgages.” I say “so-called” because with the high price of housing, a loan of $400,000 doesn’t exactly buy a mansion in most communities in the northeast. Loans of this size either are not being made or they are being offered with extremely high interest rates. The consequences are widespread. Buyers cannot get funding to consummate purchases. Sellers are left hanging when deals fall through because of no financing, and existing homeowners with soon to reset adjustable rate mortgages are trapped in their existing loans. While the current credit crunch has implications beyond the housing market, it is still the housing market that suffers the most.