Oh Give Me a Loan, Where the Jumbo Homes Roam

Buyers and lenders dealing with high-end luxury homes are finally seeing the light, highlighting further evidence of a mortgage market turnaround.


Over the past year, the New York Times repeatedly covered one of the most fascinating, if not prevalent, issues in the national mortgage market, so called “jumbo” mortgages for houses above traditional loan limits.

One story examined the restrictions and difficulties facing home owners and lenders last year regarding these properties, from their federal aid exclusion to lenders reluctance to take on mortgages beyond Freddie and Fannie’s conforming limit of roughly $730,000.

As of last year, these factors along with overall market tension had combined to create a potential “no man’s land” for those seeking jumbos. But where many lenders historically saw only challenges, entrepreneurs are increasingly seeing opportunities.

“There are high cost homes that are sitting unsold because of the difficulty in obtaining jumbo mortgage loans” says national credit union consultant Chris Oldag, advising that offering a low loan to value, ARM term mortgage for jumbos could potentially position a credit union as a market leader, simply because there are so few options presently available for these properties.

As a March Times story indicates, the window of opportunity for jumbos is one that must be utilized now, as real estate brokers in high cost areas like Manhattan have already seen up to “a 40 percent rise in sales requiring jumbo loans over last year.”

The article also quotes Dennis R. Capozza, a principal of University Financial Associates and finance professor at the University of Michigan, who compiles indexes of default risks for loans by zip code. Due to their lack of outside government assistance, he advises that “jumbo borrowers could be the first to recognize improvements in the overall mortgage market.”

This increasing demand and opportunity present in the jumbo loan market seemingly indicates the first stages of a larger turnaround in the housing market as a whole, as jumbos transform from the loans no one wanted, to springs of heightened opportunity in a recovering market.


June 4, 2010

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