A July 17, 2009 headline of USA Today read “ Upscale Home Sales Lag As Jumbo Loans Are Hard To Get.” During the first half of 2009, any realtor in Tahoe, San Diego, Los Angeles or San Francisco could have confirmed that upscale homes were not selling and the lack of mortgage financing was contributing to the problem.
Since the date of this headline, the Dow Jones average has increased from 8,711 to 10,972, the gross domestic product went from negative growth to positive growth and the Case Schiller home price index increased after three consecutive years of declining price trends. With these positive economic trends, many financial institutions are starting to gain confidence in the price stability of the collateral securing mortgages; and consequently, many banks are sticking their toes back in the Jumbo Mortgage Market.
The evidence of new jumbo products and more lenient underwriting guidelines are showing up in many places: US Bank is now offering both construction loans and lot loans; Bank of America, US Bank and GMAC are offering 80% jumbo loans for primary residences; US Bank and Bank of America are offering 75% jumbo loans on second homes; and ING, Bank recently increased its maximum loan to value for jumbo loans on primary residences to 75%. Although the maximum loan to value for larger jumbo loans is slightly lower than 80%, they are available from several banks up to $3,000,000.
Similarly to what happened in the early 80’s, the strengthening economy is encouraging financial institutions to expand their jumbo mortgage products; and as competition intensifies, loan to values and underwriting guidelines are becoming more lenient and jumbo loans are coming back.
Sierra Pacific Mortgage