Between May 4, 2007, and Nov. 7, 2008, the spread in wholesale interest rates between a $417,000 loan eligible for purchase by Fannie Mae and Freddie Mac and a $418,000 loan that is not eligible increased from 0.28 percent to 2.97 percent. Loans eligible for purchase by the agencies are called "conforming loans." Loans larger than $417,000 are called "jumbos," and borrowers who need one today face a perplexing array of choices.

Until July 1, 2008, the agencies could not purchase jumbos. However, as the private secondary market in jumbos deteriorated in late 2007 and early 2008, Congress passed the Economic Stimulus Act of 2008 in February 2008. Among other things, that bill authorized the agencies to purchase jumbos in high-cost areas.  more...