Jumbo loans fell by 12 percent by dollar volume last year (Credit: Pixabay and Wikipedia)
It turns out bigger isn’t always better.
Jumbo loans — mortgages too large to be sold to Fannie Mae and Freddie Mac — fell by 12 percent by dollar volume last year, according to a new report from the Wall Street Journal. It’s a warning sign for banks that pivoted to cater to wealthy borrowers in the wake of the financial crisis.
In general, a jumbo is any loan above $484,350, but in more expensive parts of the country it is a loan above $726,525. They are most common in expensive cities. Last year in Manhattan, 61 percent of mortgages qualified as jumbo, per that year’s loan limits, the Journal found.
The jumbo market has been hit by headwinds. Refinancings have slowed, as has the general U.S. economy, according to the Journal. House prices, while still rising, are also cooling, and new tax laws have reduced incentives to buy larger homes.
Several banks did more than half their U.S. mortgage business in jumbo loans last year, including First Republic Bank, MUFG Union Bank, Toronto-Dominion Bank and Bank of America, according to Inside Mortgage Finance. [WSJ] – Decca Muldowney