Category: jumbo mortgages

Bernanke floats jumbo loan trial balloon

Today on Capital Hill Federal Reserve Chairman Benjamin Bernanke suggested the US government may want to work with GSEs in alleviating jumbo mortgage market bottlenecks.

As an alternative to lifting that $417,000 cap, Mr. Bernanke offered a surprise answer to questions on Capitol Hill. He suggested that Congress could consider allowing the companies, known as “government sponsored enterprises,” buy mortgages of as much as $1 million from lenders, pay the government a fee for guaranteeing them and then turn them into securities to be sold to investors.

“That would be, I think, of some assistance to the mortgage market,” the Fed chairman said. “From the federal government’s point of view, it would be taking on some credit risk, which you may or may not be willing to do.” He added, “It would be a good idea to make the GSEs ultimately responsible for some, any excess losses, or some part of excess losses, relative to the premiums that are paid.”

My Comments: The desperation continues to unfold as this Summers credit crunch morphs into crisis mode. Several weeks back President Bush assured investors the US government would not bail out the mortgage market while today’s comments from Gentle Ben suggest otherwise.

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