Jumbo mortgage
In the
History
On February 13, 2008,
As of 2010[update], the limit on a conforming loan in "general" areas was $417,000 for most of the US, apart from Alaska, Hawaii, Guam, and the U.S. Virgin Islands, where the limit was $625,500. The limit in "high cost" areas was $729,750 and $938,250, respectively.[3]
On October 1, 2011, the jumbo conforming limit of $729,750 in "high cost" areas was reduced to $625,500.[4]
On November 28, 2017, the US Federal Housing Finance Agency (FHFA) announced that the ceiling loan limit for one-unit properties in most high-cost areas will be $679,650 — or 150 percent of $453,100. [5]
Risk
A mortgage broker is an intermediary between a lender and a borrower. Jumbo mortgage loans are a higher risk for lenders, mainly due to their larger size rather than credit quality.[1] This is because if a jumbo mortgage loan defaults, it may be harder to sell a luxury residence quickly for full price. Luxury prices are more vulnerable to market highs and lows in some cases. That is one reason lenders prefer to have a higher down payment from jumbo loan seekers. Jumbo home prices can be more subjective and not as easily sold to a mainstream borrower, therefore many lenders may require two appraisals on a jumbo mortgage loan.
Costs
The interest rate charged on jumbo mortgage loans is generally higher than a loan that is conforming, due to the higher risk to the lender. The spread, or difference between the two rates, depends on the current market price of risk. While typically the spread fluctuates between 0.25 and 0.5%, at times of high investor anxiety, such as August 2007, it can exceed one and a half percentage points. It can be more expensive to
Role in US housing bubble
As house prices rose as part of the
Many of these new loans were 40- or 50-year amortization, or had an interest-only option, similar to
The delinquency rate on jumbo loans rose dramatically, tripling over the course of 2009, and by February 2010, almost one in ten jumbo mortgages were 'seriously delinquent' (i.e. in arrears by at least 60 days).[9]
References
- ^ a b c Lemke, Lins and Picard, Mortgage-Backed Securities, Chapter 3 (Thomson West, 2013 ed.).
- ^ Full Text of the Housing and Economic Recovery Act of 2008
- ^ a b Confirmation of Conforming Loan Limits for 2010 - Fannie Mae, November 12, 2009
- ^ Said, Carolyn (26 August 2011). "Big changes on mortgages as 'jumbo' limits drop". SFGate. Retrieved 3 April 2019.
- ^ "FHFA Announces Maximum Conforming Loan Limits for 2018 - Federal Housing Finance Agency". www.fhfa.gov. Retrieved 3 April 2019.
- ^ Home buyers find it's harder to get jumbo loans amid credit crunch San Francisco Chronicle, August 17, 2007
- ^ Calif. home sales plunge in January Forbes.com, February 14, 2008
- ^ Many Lenders Making Jumbo Loans Have Demanded Higher Rates Gainesville Sun, September 6, 2007
- ^ Jumbo Mortgage ‘Serious Delinquencies’ Rise to 9.6% - Bloomberg.com, February 8, 2010