Home values could fall as jumbo loans disappear – Press Telegram
Soon, giant mortgages will be as hard to get as Charmin and Purell.
Just a few weeks ago, the entire giant private label mortgage channel came to a halt.
Jumbos are mortgages above the “compliant” amount that can be sold to mortgage giants Fannie Mae and Freddie Mac, or loans totaling more than $765,600 in Los Angeles and Orange counties and more than $510,400 in the Riverside and San Bernardino counties.
Private label jumbos are usually financed by non-bank lenders.
Non-bank lenders fund 20% of the jumbo market while custodians (banks and credit unions) fund the remaining 80%, according to Guy Cecala, CEO and publisher of Inside Mortgage Finance. Nationally, giant mortgages accounted for 17% of the $2.3 trillion issued in 2019.
So what? We still have custodian banks financing jumbos.
While Citibank and Chase continue to buy jumbos from other lenders, Wells Fargo Bank temporarily suspended the purchase of jumbo loans from other lenders last week. The nation’s largest mortgage manager is also limiting jumbo refinance applications to existing customers who already have deposits or other asset accounts worth $250,000 or more.
Bank of America stopped buying jumbo loans from other lenders in 2011. However, B of A and Chase still provide jumbos to their customers.
Last year, Southern California borrowers took out more than 56,000 jumbos totaling more than $66 billion, according to Attom Data Solutions. Statewide, borrowers received more than 146,000 jumbos last year, totaling more than $165 billion.
Figures from Black Knight show that in February, 13-14% of this year’s mortgages in Los Angeles and Orange counties are jumbos, just under 12% are jumbos statewide .
A lender raised its jumbo rates from the low range of 4% with no points a few weeks ago to 8.625% with 3 points. Yes, on the moon!
If you’re considering getting a jumbo loan, you need to act fast.
All it takes is a fire sale of a comparable home in your neighborhood to result in worse jumbo pricing for you or no jumbo mortgage because you don’t have enough equity.
And lenders still offering jumbo loans could be sated sooner rather than later. Or, they might be spooked by the next news related to the economic calamity of the coronavirus and simply put their cold, ringing cash on ice.
As an alternative, you can get a high-balance Fannie Mae loan (up to $765,600 in LA/OC and $510,400 in the Inland Empire) and do a combination of a first deed of trust and a second , sometimes called a second piggyback.
I found superfluous seconds to go up to $500,000. These aren’t ideal though, as the seconds are usually adjustable, with higher rates to boot.
Freddie Mac rates the news: The 30-year fixed rate averaged 3.33%, unchanged from last week. The 15-year fixed rate averaged 2.77%, down 5 basis points from last week.
The Mortgage Bankers Association reported a dramatic 17.9% drop in loan application volume from the previous week.
At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $510,400, last year’s payment was $228 more than this week’s payment of $2,244.
What I see: Locally, well-qualified borrowers can get the following points-free fixed-rate mortgages: A 30-year FHA (up to $442,750 in the Inland Empire, up to $510,400 in Los Angeles and Counties) ‘Orange) at 3%, a 15-year conventional loan at 2.875%, and a 30-year conventional loan at 3.25%, a 30-year conventional high balance ($510,401 to $765,600) at 3.375%, a 30-year variable rate jumbo mortgage that is locked in for the first seven years at 3.75%.
Eye-Catching Loan of the Week: A jumbo 30-year fixed rate at 5% with a cost of four points.