The government\'s two top economic guns believe it is
only a matter of months before the jumbo mortgage
market recovers and begins operating normally again.
Federal Reserve Board Chairman Ben Bernanke and Treasury
Secretary Henry Paulson told a congressional panel that
the jumbo market is under stress but will be functioning
normally again in a few months. The jumbo mortgage
market traditionally has been a very profitable part
of the mortgage market, with low default rates, Secretary
Paulson said.
For that reason, it seems logical that this market will
right itself in the weeks and months ahead. Both agreed
that allowing Freddie Mac and Fannie Mae to enter the
jumbo market temporarily would provide needed liquidity.
Freddie chairman and chief executive Richard Syron testified
that the difference between the rates on jumbo and conforming
mortgages is 92 basis points, and far exceeds any spike
in the past 20 years.
Allowing Freddie and Fannie to enter the jumbo market even temporarily might prevent declines in home prices that
could lead to additional defaults, Mr. Syron said. But
the Fed and Treasury chiefs contend that Congress needs
to pass comprehensive government-sponsored enterprise reforms
before the GSE conforming loan limit should be lifted
