The jumbo mortgage market has seen a dramatic downturn in recent years, which has been costly for banks and other depositories. Jumbo mortgages refer to mortgages which exceed certain thresholds on loan amount, recently set at $510,400. This two-part series takes a deep dive into the jumbo downturn, looking at the underlying factors that led to the decline and why the situation is becoming increasingly challenging for banks. Recent trends in the market have hit the top coastal jumbo markets particularly hard.
The jumbo downturn has its roots in the aftermath of the Global Financial Crisis of 2008. Following the crisis, lenders and borrowers changed their approach to mortgages, partly due to more stringent regulations and partly due to changes in borrowers’ expectations. Jumbo loans require greater covered for lenders, and borrowers also tend to be more risk averse, leading to slower loan origination times and lower approval levels. Additionally, origination costs have also been on the rise, making jumbo loans a less attractive option for lenders and borrowers alike. The surge in delinquencies and defaults due to the current economic climate has exacerbated the problem. As a result, jumbo lenders have had to adjust their lending criteria, curtail their operations, and abandon some markets altogether.
Key Points:
– Jumbo mortgages refer to loans that exceed certain set thresholds on loan amount
– The genesis of the jumbo downturn lies in the aftermath of the Global Financial Crisis of 2008
– Changes in lenders’ and borrowers’ approach to mortgages, stricter regulations, lower approval levels, and higher origination costs have all contributed to the downturn
– The current economic climate has led to higher delinquency and default levels, exacerbating the issue
– Banks have had to adjust their lending criteria, curtail their operations, and abandon some markets
You can read this full article at: https://www.housingwire.com/articles/the-jumbo-markets-turning-point-part-i/(subscription required)
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