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Jumbo Loan |
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Jumbo loan Loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for purchase or securitization by the federal agencies. Jumbo Loan 1. A mortgage loan so large it exceeds the limits for securitization by U.S. government mortgage banks. As such, a jumbo loan cannot be guaranteed or securitized by Freddie Mac or Fannie Mae. Because of this, jumbo loans carry higher credit risk and have historically been traded at a premium to conventional mortgages. 2. A loan of $1 billion or more. Jumbo Loan What Does Jumbo Loan Mean? A mortgage with a loan amount that exceeds the conforming loan limits set by the Office of Federal Housing Enterprise Oversight (OFHEO) and therefore is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. OFHEO sets the conforming loan limit size on an annual basis. Also referred to as a jumbo mortgage. Investopedia explains Jumbo Loan Jumbo loans often are securitized by institutions other than Fannie Mae and Freddie Mac. These securities carry more credit risk than do those issued by Fannie Mae or Freddie Mac and therefore trade at a yield premium that translates into slightly higher interest rates. However, in recent years the spread in interest rates between jumbo and conventional mortgages has been reduced. Related Terms: Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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