Credit Crunch - Part 2

I'll follow up with a longer post, but this is an interesting graphic from CNN. Jumbo mortgages are $417,000 and higher, and by law are not allowed to be insured by Freddie Mac and Fannie Mae, which are governmental institutions that guarantee to purchase mortgages that are "conforming", which means the borrower meets certain requirements and that the loan is a 30 year fixed rate mortgage for no more than 80% of the houses appraised value.

The government's guarantee for the conforming loans amounts to a serious reduction in risk for the lender if the borrower can't pay. You can see the risk-reward relationship clearly demonstrated in this chart.