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Jumbo Home Loans Near Pre-2008 Crisis Levels

Fewer buyers qualify for conventional mortgages due to higher prices and lower downpayments. As a result, the number of jumbo loans is at pre-Great-Recession levels.

NEW YORK – Bank of America (BofA) researchers reported that originations of “jumbo” U.S. residential mortgage loans surpassing “conforming limits” set for Freddie Mac and Fannie Mae could total $550 billion this year, a level not seen since the run-up to the 2008 financial crisis.

Jumbo originations reached about $283 billion in the first half of 2021, putting the annual volume close to a post-crisis record. However, several public mortgage lenders recently said they would offer borrowers confirming loans of up to $625,000, a level expected to match new federal guidelines for 2022.

Bank of America said jumbo mortgage-bond issuance in 2021 has already reached a post-2008 record of $38 billion, with $45 billion likely by year’s end. The firm cited an expanded investor base for private-label mortgage bonds, as well as low credit losses and “strong” origination guidelines.

Credit in the U.S. housing market is on the rise yet remains relatively tight in the years since millions of homes wound up in foreclosure. Qualified borrowers recently could obtain rates of less than 3% on 30-year fixed home loans, a boon for many first-time home buyers.

Wall Street generally expects the Federal Reserve to detail its plan in November for tapering its $120 billion in monthly emergency purchases of Treasury and agency mortgage-backed securities as the U.S. economy bounces back. Tapering could also push mortgage rates higher.

Source: MarketWatch (10/11/21) Wiltermuth, Joy

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