Toll Brothers (NYSE:TOL) CEO and chairman Robert Toll tried to assuage fears that the tightening of lending standards on jumbo loans will crimp the company's ability to sell homes, announcing a $500 million stand-by mortgage fund commitment from Citizens Bank, which is owned by The Royal Bank of Scotland.

"We went out and sought this commitment to answer the markets' concerns about our ability to place our jumbo loans," Toll said. "The market is very concerned about whether Toll Brothers will be able to take care of its mortgage needs because of dislocations in the mortgage market. Specifically, people believe jumbo loans are no longer being offered. We sought this commitment as much for the markets as for ourselves to prove you don't have a problem placing jumbo loans."

Earlier this week, Daniel Oppenheim, an analyst with bank of America, downgraded Toll from neutral to sell because of challenges facing home buyers needing jumbo loans. Loans with values over $417,000 qualify as jumbo loans. In the report, Oppenheim said that the spread between jumbo loans had moved 45 to 50 basis points compared to conforming loans. Previously they were about 25 basis points higher; in the past two weeks, they've climbed to about 70 basis points higher than conforming loans. This would seem to hit Toll especially hard, since its 2007 deliveries will have an average price of about $670,000.

However, Toll's CEO says that many of its lenders, including Chase, Wells-Fargo, Bank of America, and even beleaguered Countrywide, are still providing jumbo loans. He asserts, long term, the spreads of these loans would move closer to conforming loans because borrowers will have contribute more equity to secure a jumbo loan than they would for a conforming loan. "Very often the jumbo loan is more credit worthy than the conforming except for the guarantee [from the Fannie Mae or Freddie Mac]," Toll said.

Eventually, Toll thinks increased security with jumbo loans will differentiate them from other loans not backed by the government agencies. "We think what you're going to see in the future is a differentiation in the kinds of jumbos as they're put to market in securities," Toll said. "Right now, securitization is still pretty much blocked. I believe what you'll see is securitization come back for quality paper. That will have a different score than, of course, than the subprime paper."