Abstract
Consistent with a series of recent papers, the interest-rate differential between mortgages eligible for purchase based on loan size by Fannie Mae and Freddie Mac and larger loans is estimated to be 22 basis points over the 1986 to 2000 period. This differential averaged 19 basis points for the 1996-2000 period. Other signficant effects include: loans slightly above the conforming loan limit and originated late in a calendar year often have a lower rate that nearly fully anticipates their likely characterization as a non-jumbo loan after the conforming loan limit is indexed effective each Janauary; loan-to-value ratios affect jumbo loan rates much more than they affect non-jumbo loan rates; loans located in non-metropolitan areas have a 3 basis point differential versus loans in metropolitan areas that is surprisingly small given the likely higher cost to service non-metropolitan loans and the higher degree of uncertainty about non-metropolitan collateral values; and estimated regional mortgage rate differentials have narrowed through time.
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