Demand for Jumbo Mortgages Rising by Jim Woodard on Creators.com

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Demand for Jumbo Mortgages Rising

Applications for large mortgages are exceeding the number for modest mortgages in today's market.

Mortgage bankers funded $26.6 billion of jumbo loans during the third quarter of last year. That's a 30 percent gain from the same period during the previous year, according to recent survey figures compiled by National Mortgage News.

Jumbo mortgages are those larger than $417,000 in most areas of the country —too large to be sold to secondary mortgage buyers Fannie Mae or Freddie Mac.

What makes the gain so impressive is that total industry-wide fundings fell 20 percent in the third quarter of last year compared to the third quarter of 2010. According to interviews conducted during the survey, most banks that are jumbo funders continue to hold these nonconforming loans in their portfolios.

"Chase, the mortgage division of JPMorgan Chase, ranked first among all jumbo producers in the third quarter, originating $2.78 billion, edging out the No. 2 ranked firm, Bank of America ($2.75 billion.) Wells Fargo & Co., declined to provide a jumbo volume number, but chances are its fundings probably were larger than Chase's," according to National Mortgage News.

The robust sale and refinancing of high-valued homes in some regions is the primary reason for the rising demand for jumbo mortgages. Interest rates for these loans are generally a bit higher than for the smaller conventional mortgages.

Q: Why aren't more REO homes rented?

A: Renting REOs (bank-owned houses) is a strong recommendation of Federal Reserve Chairman Ben Bernanke. He believes there should be a special government support program allowing renters to move into REO houses.

"Inefficiencies in the foreclosure and mortgage origination processes are dragging on the economic recovery. Preliminary estimates suggest that about two-fifths of Fannie Mae's REO inventory would have a cap rate above 8 percent - sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property," Bernanke said in a letter to legislators.

Q: Are mortgage modification scams increasing?

A: Yes. In fact, mortgage modification scams made the list of "Top Ten Scams of 2011," assembled by the Better Business Bureau.

Because the federal government announced or expanded several mortgage relief programs this year, the BBB says all kinds of sound-alike websites have popped up to try to fool consumers into parting with their money. Scammers are representing themselves as government agencies or the BBB itself in order to gain consumers' trust.

Q: Does the government provide free counseling services?

A: Counseling services have long been available and recently were expanded. As part of its continuing effort to provide quality housing counseling to the nation's homeowners, buyers and renters, the Department of Housing and Urban Development recently announced the availability of $2 million in grants for housing counseling training.

HUDs goal is to fund eligible organizations to deliver training across the full spectrum of counseling services, it was announced.

"These funds for training will help HUD-approved housing counseling organizations be better prepared to offer services assisting families in making better choices in buying or renting homes and in helping thousands of struggling homeowners avoid foreclosure and remain in their homes," said HUD Secretary Shaun Donovan.

This year, HUDs Housing Counseling Grant program will provide more than $40 million for comprehensive counseling, Reverse Mortgage Counseling and supplemental funding for Mortgage Modification and Mortgage Scam Assistance.

Q: When will home prices start rising again?

A: This could be the year when prices start climbing. While year-over-year home price measurements notched down in 2011, prices are expected to see a slight uptick in 2012, according to Clear Capital.

"Should the company's predictions ring true, it would be the first time since 2006 that the change in annual home prices has landed in positive territory. Data released by Clear Capital shows year-over-year, national home prices dropped 2.1 percent in 2011. For 2012, the company projects a slight gain of 0.2 percent," a company report stated.

Q: To what extent are baby boomers helping their kids buy homes?

A: One in 5 baby boomer couples have already given at least one of their children the means to purchase a home — either buying it outright, furnishing the down payment or co-signing the loan, according to a survey by Better Homes and Gardens Real Estate, an international real estate franchise network.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.