Jumbo Mortgages: Bigger Is Better, Again

JUMBOS are back! I thought I'd use all caps for JUMBO to sort of, you know, emphasize the bigness of the news and, frankly, to get your attention. Now, since this is a real estate/housing-oriented site, JUMBOS obviously refers to jumbo mortgages.

CitiMortgage, the mortgage finance arm of Citigroup
has announced that it is lowering its jumbo mortgage rates to 5.625 percent for a 30-year fixed rate mortgage. As recently as October 2008, jumbo rates averaged 7.95 percent.

Jumbo mortgages mean loans above $417,000 -- though that was raised on a temporary basis to $729,750 for certain higher-priced markets. And that's even though loans above the old amount still usually translate into higher interest rates and tighter lending standards.

The amounts are the limits established to get government backing or for lenders to unload (I mean sell) the loans to those darlings of the mortgage financing world, Fannie and Freddie.

But that is for their "highly credit-worthy borrowers."

I think that means rich people, but I could be mistaken. Anyway, this rate is down from more recent jumbo rates that usually hit the 6 percent mark.

Speaking to Reuters, CitiMortgage CEO Sanjiv Das said, "We are beginning to see a lot of interest in the jumbo market." Guess we're not talking downtown Detroit here.

According to The Wall Street Journal, banks in the tri-state area of New York, Connecticut and New Jersey are now making it easier to get a jumbo mortgage -- provided you have a credit score of 740 or higher and can afford to shell out a down payment of "at least 20 percent for loans up to $1 million and 30 percent for loans up to $2 million."

"The availability of money has improved and the price of that money has improved," said Keith Gumbinger of HSH Associates, a financial publisher.

The Journal also points out that jumbos have "fallen to their lowest levels in years."

Just the other week, Redwood Trust announced a plan to offer the first private securitization of mortgage-backed debt since 2008, based on jumbo mortgages. This is seen as a test case to determine whether the dried-up private securitization markets can be brought back to life in any meaningful way. If so, that could impact the entire mortgage market, with lending institutions becoming more free-spending for standard mortgages -- jumbos included. Or so the theory goes.

If people who can afford the more expensive homes can get financing more easily, then average home-buyers should be able to as well. Jumbo mortgages with lower rates mean more credit liquidity for everyone, and that's not peanuts.

Charles Feldman is a journalist, media consultant and co-author of the book "No Time To Think, The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate-related issues for several years.
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