Why the Jumbo Loan Mortgage Has Gone Dry
It's going to become harder and harder to get a jumbo mortgage, a home loan over $417,000. That's because banks who lend mortgages like to resell them almost immediately and pocket the cash. In doing so, they get upfront money and get the risk off their books.
The problem is that while quasi-government agencies Fannie Mae and Freddi Mac only buy loans from banks under $417,000. Other investors buy jumbo loans and at the moment they are not buying. So, if banks don't have a place to sell their jumbo loans (securitize) then they aren't going to make loans. Or if they make loans, the interest rate will be significantly higher.
The 30 Year fixed Jumbo mortgage is now at 7.09% versus 6.25% for a non-jumbo conforming loan. That assumes you can even get a jumbo mortgage. Even borrowers with good credit are finding it difficult to be approved.
This certainly portends at least a short term drop in home sales as buyers struggle to get the financing they need in high priced markets like California and New England.
Comments
Add your Comment