Not Everyone Enjoying Low Mortgage Rates The government is pushing interest rates on home loans down to their lowest levels in more than 35 years. That's helped a lot of people who've refinanced save hundreds of dollars a month on their mortgage payments. But a lot of people can't qualify for those low rates. And it's not just those with bad credit. People with more expensive homes are also being left out.
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Not Everyone Enjoying Low Mortgage Rates

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Not Everyone Enjoying Low Mortgage Rates

Not Everyone Enjoying Low Mortgage Rates

Not Everyone Enjoying Low Mortgage Rates

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The government is pushing interest rates on home loans down to their lowest levels in more than 35 years. That's helped a lot of people who've refinanced save hundreds of dollars a month on their mortgage payments. But a lot of people can't qualify for those low rates. And it's not just those with bad credit. People with more expensive homes are also being left out.

STEVE INSKEEP, Host:

One thing the outgoing Bush administration has done is push mortgage rates to their lowest levels in nearly four decades. Many people who have refinanced have saved hundred of dollars per month, which should strengthen the housing market, but a lot of people cannot qualify for the low rates. And it's not just people with bad credit. NPR's Chris Arnold reports from Boston.

CHRIS ARNOLD: The financial crisis has definitely been getting better and parts of the frozen credit markets have been thawing out. But here's a sign that things are still out of whack. Right now, people who live in more modest houses, schoolteachers, bus drivers, nurses, can get very low rates, but people with bigger loans for more expensive homes have to pay a dramatically higher rate. And most of those people aren't millionaires.

M: My house is a very ordinary house. It is by no means, you know, a mansion or Taj Mahal. It's your basic Colonial. Three bedrooms...

ARNOLD: Bill Kearns is an accountant who lives in Westwood, Massachusetts. It's a nice suburb outside Boston. He's got four kids. He says he doesn't make enough to afford private school for all of them, so a few months ago, he says, he moved to be in a better school district. Houses weren't cheap; he paid around $470,000, and that was a bit of a stretch.

M: Not that we can't afford the mortgage. we can certainly afford what I have now. But I'm paying more than I would clearly like to. With a family of six, you can never make enough money.

(SOUNDBITE OF LAUGHTER)

ARNOLD: Without that backing, larger loans have always had slightly higher rates, but right now, the premium for the bigger loans has gotten huge. Kearns is paying around seven percent. Rates have been around five percent for the smaller conforming loans. So he's paying $500 a month more than he'd pay if he could get that lower rate.

M: Certainly, $500 a month would absolutely help. And it's not like it's a very high-risk mortgage. I mean, I make a good pay doing what I do. I clearly have the income to pay the mortgage. And, you know, I just think its unfair that other people can get this rate and I can't.

ARNOLD: Kearns keeps calling his mortgage broker to see if he can work something out.

M: I talk to him, you know, probably once a week. What can we do here? We got to be able to do something. We got a find a way to make this work.

M: He's sitting at seven percent, and I'd like to get that down.

ARNOLD: Kearns' mortgage broker, Paul VanWort, is working the phones trying to get him a better deal from another lender. But so far, no luck. VanWort says he's getting four or five calls or emails a day from people like Kerns who can't qualify for the low rates because their loans are too big.

M: It's frustrating, because I have some very good clients that are also good friends that I'm not able to refinance. I, for one, have a jumbo loan that I can't do anything with. There's nothing I can do about it.

ARNOLD: The reason for the big premium on these larger loans is that lenders are nervous. The economy could be heading into the worst recession since World War Two, and the banking system is still in shock from the sub-prime mortgage debacle.

M: With everything that's happened in the credit markets, everything is thrown out of whack.

ARNOLD: Jon Shibley is the founder of Lenox Financial, a large mortgage broker. He says lenders are still very reluctant to loan any money at all for home loans if the government's not guaranteeing them. And the government hasn't been willing to guarantee these larger so-called non-conforming home loans. Last year, the government was guaranteeing larger loans in some high-ranked districts, but starting this January, it lowered those limits.

M: The lenders only have a certain amount of money to lend. And if they have a choice to put it in bucket number one, where it's all guaranteed, you can be paid up front and sell it off to Fannie and Freddie Mac, and bucket number two is you have to hold it and take the risk of values that continue to go down, I think they're going to put most their money in bucket number one for a while.

ARNOLD: It looks like some more people will be getting into that bucket with the lower rates. Key lawmakers are now pushing to once again raise the limit for loans that Fannie and Freddie can purchase. Up to about $730,000 for people who meet certain qualifications in dozens of high-cost counties. Already, though, millions of Americans can get very low rates. That's putting extra money in their pockets, and the governments hoping that will be a powerful boost to the struggling economy. Chris Arnold, NPR News, Boston.

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