| As the housing crisis broadened, jumbo mortgages | | | | On a $1 million loan size, that could mean a savings of |
| predictably became harder to obtain. Already | | | | over $1,800 on a monthly mortgage payment. |
| considered high-risk mortgage loans before the credit | | | | Because mortgage lenders no longer have buyers for |
| crunch began, jumbo mortgage rates climbed to | | | | the jumbo mortgage loans that they approve, they are |
| excessive limits. The recent drop in conforming | | | | required to keep them in their portfolios. Since |
| mortgage rates has also had an impact on jumbo | | | | consumers are now being especially cautious with their |
| mortgage rates. | | | | money, they are no longer investing in the stock |
| Jumbo mortgages, as they are commonly referred, | | | | market and are putting it into much safer and |
| are non-conforming loans that are above the industry | | | | conservative investments, such as savings and money |
| standard for conventional conforming loans that can | | | | market accounts. As a result, banks now have more |
| be bought by Fannie Mae or Freddie Mac. The industry | | | | money to lend. |
| standard loan size that can be purchased by these | | | | Ultimately, when money comes in the front door, banks |
| two government-sponsored enterprises (GSEs) on a | | | | are then sending it out the back door as a mortgage |
| 1-unit property is $417,000, but can go as high as | | | | loan. In addition, when homeowners are refinancing |
| $729,750 in high-cost areas on the continental United | | | | their conforming mortgages due to the record-low |
| States and $1,094,625 in high-cost areas in Alaska, | | | | interest rates, banks are afforded more liquidity to |
| Hawaii, Guam and the U.S. Virgin Islands. | | | | offer jumbo mortgage loans. |
| A small number of prominent lenders recently began | | | | Each lender will have different requirements than the |
| announcing jumbo mortgage rates in the low-to-mid | | | | next. Because there are no buyers for jumbo |
| 5% interest range. Industry experts expect more | | | | mortgages, each lender creates and maintains their |
| lenders to join in on this practice in the very near | | | | own guidelines and pricing before placing it in their |
| future. | | | | portfolio. A slow down in jumbo originations indicates a |
| At their peak, jumbo fixed rates reached almost 8% at | | | | tightening of requirements and an increase in rates. |
| the end of October 2008. Today, some mortgage | | | | Consequently, these extremely low jumbo mortgage |
| lenders are being extremely aggressive with their | | | | rates may not be available for very long. |
| jumbo fixed-rate mortgages, pricing as low as 5.25%. | | | | |