Poor folks, no. Sub-prime, certainly.

In the Bay Area - which, by the California Association of Realtors’ measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240.

Good luck finding a home for less than $417k. They don't exist unless you are looking at condos or townhomes.

Stockton is in San Joaquin, so a bit East from the Bay Area proper, and accordingly so, less expensive. According to RealtyTrac, Stockton is the foreclosure capital of USA. In a population of 300000, 1 in 27 households is facing foreclosure. Those are sub-prime homes.

I see where you are coming from, looking at prices nationally, or from your experience in Texas, but there are plenty of of places where millions of folks are struggling to get by in markets where the jumbo loan is the only loan in town. Boston and New York also come to mind.

Just because it's jumbo doesn't mean it's subprime. If you make $2m/yr and have a $700k mortgage, that is a good-quality mortgage. This brings more raw material for the mortgage bundling bond dealers.

This would inject higher quality mortgages into the market for mortgage bonds. This would dilute the toxic waste and create the idea, at least for the gullible, that the mortgage market is being cleaned up.

Sure, we lied to you in the past, but they're AAA now, really! - Standard & Poor

Forget it, Jake - it's AmnesiaTown

There is a serious problem in certain East and West coast markets where virtually no private residence is available for less than $500,000. The Fannie Mae definition of jumbo mortgages as non-qualifying for their purchase or guarantee sets a cap of $417,000, which is well beyond the median U.S. home price and in a sense compensates for expensive markets. It just doesn't compensate for certain markets at the extreme high end of the distribution.

There is no social policy here. Fannie Mae's mission, at least as defined on its website, is to help make housing affordable to all Americans. It's not set up just to help the poor or the middle class. So raising the cap to help wealthy people afford a McMansion does not violate what I presume is its Congressional mandate.

There is, however, a fiscal policy issue. Fannie Mae is sitting on $30 billion of equity, less than Goldman Sachs, but they are ten times more exposed to mortgage risk than Goldman or anybody else. They've just updated their earnings and taken one of those whopping write-downs that are common on Wall Street. A few more of these and they will run out of equity, so maybe they shouldn't be taken on jumbo loan risk at this point.

Maybe I'm old fashioned, or maybe just out of touch--although I doubt it--but I don't know too many poor folks, or sub-prime like folks who have jumbo mortgage loans? This seems like more of the same, rich guaranteeing the rich as opposed to helping the folks who really need it.

I don't think this is helping folks (buyers) who really need it as much as saving the RE market on the disporportionately expensive coasts. According to reports, RE markets in LA, SF, NYC, Boston, etc. are stalling out because credit-worthy buyers can't find lenders in this environment.

However, this brings up the question about what the role of government is. Should government use its clout influence markets or just create a level playing field for them to operate, and where is the line between them? A lot of people are going to feel that government should not be assisting markets in disproportionately priced areas of the country just because their high prices are slowing down markets and inconveniencing some buyers and sellers.

Maybe the market is saying that prices are too high if lenders risking in the market won't come forward without quasi-government guarantees? Then, there's the question of creating exposure through this for Fannie Mae, which the market accepts as virtually government-guaranteed. Set up for another public bailout? Big questions here. First, it's saving those too big to fail, and then it's helping the wealthy (sorry, anyone paying more than 500K for a dwelling is wealthy by median US standards) by greasing the market's wheels.

A stroll through today's breaking news page at LATOC.

I did inhale.