More Help For The Housing Market

I think the news from Freddie Mac (FRE) today was pretty significant, although it received little attention.

In the press release, Freddie said it will buy jumbo mortgages in high-cost regions from Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) and Washington Mutual (WM). The government-sponsored enterprise expects to finance between $10 billion and $15 billion in new jumbo mortgages in 2008.

The move is meant to increase liquidity in the housing markets, and today's announcement marks the first large-scale effort to jump-start the stalled jumbo mortgage market under the Economic Stimulus Act.

I think this is big news and should help the housing market get closer to the eventual bottom. The old cap on jumbo loans was absolute ridiculous for high-cost markets such as Los Angeles, San Francisco, etc.

I have always thought that there should be some sort of regional adjustment to these caps. And with many of the former big jumbo lenders -- Thornburg Mortgage (TMA), for instance -- licking their wounds, an injection of fresh liquidity should help.