Good Evening, everyone!
Couldn't let another cold winter night here in Chicago go by without posting one more time!
It wasn't all that long ago, you know, when the biggest banks in the U.S. - J.P. Morgan Chase (and the since-Chase-acquired Washington Mutual), Bank of America, and Wells Fargo among them - originated hundreds of millions of dollars in jumbo loans. These hefty jumbo loans exceed the Fannie Mae/Freddie Mac Conforming Loan Limit, currently $417,000 in the Chicago Metro Area, as high as $625,000 in some high-priced metro areas such as San Francisco and New York City.
From an article by Nick Timiraos in today's Wall Street Journal, during the first nine months of last year, these large banks accounted for nearly half of all jumbo mortgage loans written in the United States. They range in value from an average of $750,000 to, in some cases, in excess of several million dollars. According to mortgage-data research firm LPS Applied Analytics, in December, 2008, roughly 6.9% of all prime jumbo loans were at least 90 days in arrears - up from a comparative-paltry 2.6% at the end of 2007.
By way of comparison, only 2.1% of non-jumbo prime loans were 90 days or more delinquent as of the end of December - still up sharply from the 0.8% non-jumbo delinquency in December, 2007.
The struggling U.S. Economy, ripe with slow-to-sell homes and high levels of unemployment across all salary and age brackets, is fueling increased default rates among homeowners. Jumbo loans add increased pressure to a lender's bottom line due to their larger loan values.
Fewer lenders, including the large ones listed above, are even offering jumbo loans anymore. Chase still offers them, but they and other lenders still carrying jumbo products charge far-higher interest rates and fees than for lower-level, conforming mortgages. According to financial publisher HSH Associates, average rates on 30-year fixed jumbo loans were 6.87% last week, compared to an average of 5.34% for lower-value conforming home mortgages.
Credit Suisse estimates nearly 25% of prime jumbo mortgage loans currently exceed the value of the homes they are backing. Given the lender's expectation of additional price declines of 15% over the next two years, that "under water" percentage could increase to almost 42%.
See our post today via BlogChicagoHomes.com, please.
DEAN MOSS & DEAN'S TEAM CHICAGO
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