With foreclosures drying up, first-time buyers out in droves and Fannie and Freddie’s ledgers roaring back into the black, signs of a revival in the housing market have grown steadily more numerous over the past several months. Now, one of the final pieces for a return to normalcy may be in place: The return of private market jumbo lending.
“Jumbo” loans are those which are too pricy to be purchased by Fannie Mae and Freddie Mac or financed by the Federal Housing Administration. For 2013, the upper bound is $417,000 for much of the Bay State, with limits extended to $465,750 in the Boston metro area and $625,500 for Nantucket and Martha’s Vineyard.
But even those numbers are far below the median sale price for a single-family home in many Massachusetts towns. For borrowers in places like Wellesley (where the median price for a single-family home was $897,700 last year, according to data provided by The Warren Group, publisher of Banker & Tradesman), Belmont ($689,000) or Newton ($780,000), the collapse of the private jumbo mortgage lending market in 2008 meant many have struggled to obtain a loan or refinance an existing loan.
While jumbo lending never completely went away — borrowers with sterling credit have remained able to obtain loans from banks who retain them on their own portfolio — that return of secondary market lenders willing to take on jumbo loans and securitize them will greatly ease their ability to purchase. And that’s just what seems to be happening now.
“The jumbo market for anybody that’s been a portfolio lender, it really never went away. But there are securitization outlets now that are really expanding opportunities in the jumbo market,” said Ed McDonald, president of Salem Five.
Signs Of A Thaw
Signs of a thaw have recently been accelerating. New lenders like Jacksonville, Fla.-based EverBank Financial Corp. — which issued their first jumbo-backed security in March — is finally plunging a toe into the market, while stalwarts of jumbo lending during the boom like Redwood Trust, a California REIT, are also slowly reviving their operations. Redwood issued its fifth private-label security earlier this month. And the giants of Wall Street are also returning to the sector: Last month, JP Morgan Chase announced its first issuance of a new jumbo mortgage-backed security since 2007.
“We expect that the options are going to much more available this year for jumbo financing,” said Charlie Ferraro, president of William Raveis Mortgage. “I think that end of the market is really starting to loosen up. We’re going to see a lot of improvement in there this year. There’s a number of [securitizers] out there.”
That confidence is being borne out in the data so far: According to The Warren Group, single-family jumbo loans are up 32.7 percent in the first quarter of the year, with 5,378 issued compared to 4,054 in the same period in 2012. Refinances surged up 34 percent and purchases were up 27.4 percent. Those are the highest numbers since 2007, when 5,910 jumbo loans were issued in the Bay State.
Though the number of loans issued is on the rise, loan volume has not yet made a comparable recovery. In the first quarter of 2007, those 5,910 loans added up to $4.9 billion in volume, while the 5,378 loans issued in 2013 totaled $3.9 billion.
Still, the return of the secondary market should help ease a hungry upper-end buyer’s market. As Mark Lippolt, senior vice president of operations for Hammond Real Estate recently told a gathering of lenders, in towns like Newton, homes between $1 and $1.2 million, “We could sell them all day.”
Email: csullivan@thewarrengroup.com
