The Treasury Department's 'white paper' on the future of the GSEs not only calls for the federal government to cut the government umbilical to Fannie Mae and Freddie Mac, but estimates that certain mortgage rates could rise upwards of 150 basis points, according to sources who claim to be familiar with some of the plan's contents.
In particular, the interest rate on non- 'qualified residential mortgages' may be 150 to 200 basis points higher than on loans that are considered safe.
"This will basically cause a bifurcation in rates — and it won't cause these rates to be close at all," said one trade group official, requesting has name not be used.
He noted that the implication is that QRM loans and FHA-backed products will carry lower interest rates than jumbo mortgages.
This source, and an advisor who has talked to Treasury about the plan, believe jumbo rates will assuredly increase — but it also will create an incentive for lenders to enter the jumbo space because Treasury will allow the GSE loan limit to fall to $625,500 in the fall, and then to $419,000 two years later.
But sources warned that the contents of the Treasury white paper — which is about 22 pages long — could change by its anticipated release on Friday.
The Treasury Department is not discussing the white paper until its release.
