Borrower: “I’m trying to use logic.” Banker: “That’s your problem”

Well-heeled borrowers are facing difficulties getting jumbo home loans as lenders pull back

National /
Apr.April 21, 2020 03:15 PM
(Credit: iStock)

(Credit: iStock)

The economic upheaval brought on by the coronavirus pandemic has banks tightening their lending standards for even their wealthiest borrowers.

Borrowers are having trouble securing new “jumbo mortgages” and refinancing their existing debt, according to Bloomberg. Jumbo mortgages are loans that are too pricey for the federal government to back — around $510,400 across most of the country and $765,500 in New York City and parts of California ­— so lenders take on all of the risk.

Even well-heeled borrowers with squeaky clean credit records are being turned down. Aerospace executive David Adler tried to refinance his $700,000 mortgage on his Irvine, California home that he bought eight years ago to get a lower interest rate. But his lender, U.S. Bank, refused.
“I told the guy at the bank, ‘I’m trying to use logic here,’” Adler told Bloomberg. “And he said, ‘That’s your problem.’”

The availability of jumbo loans dropped 37 percent last month — double the drop for the overall mortgage market.

Banks are also charging more for jumbo mortgages relative to conventional mortgages than they have in nearly seven years. As of last week the interest rate on a 30-year fixed jumbo loan was about 30 basis points higher than the rate on a normal mortgage.

Jumbo mortgage holders are just as likely to stop paying their loans as conventional borrowers. Around 5.5 percent, or 131,000, of jumbo borrowers have asked for some form of forbearance, more or less on par with the 6 percent of overall borrowers.

Banks have also pulled credit lines for smaller mortgage lenders they finance and stopped buying loans from correspondent lenders, partly because they don’t have the liquidity to do so. [Bloomberg] — Dennis Lynch


Related Articles

arrow_forward_ios
(iStock/Illustration by Alexis Manrodt for The Real Deal)
Manhattan job losses in Q3 worst of any large county in the US
Manhattan job losses in Q3 worst of any large county in the US
Jerome Powell (Getty)
Powell sees new opportunity to reform low-income lending rule
Powell sees new opportunity to reform low-income lending rule
R&B Realty's Aron Rosenberg and Maverick's David Aviram of Maverick with 28 West 36th Street and 32 West 39th Street (Google Maps)
Midtown landlord sues to stop foreclosure by Maverick
Midtown landlord sues to stop foreclosure by Maverick
HSBC COO John Hinshaw (Getty, iStock)
HSBC to shrink its office footprint amid shift to WFH
HSBC to shrink its office footprint amid shift to WFH
(iStock/Illustration by Alexis Manrodt for The Real Deal)
US home prices are more than 5% too high: Fitch
US home prices are more than 5% too high: Fitch
The Texas snow storm was partly responsible for the decline in mortgage applications. (Getty)
Texas storm, increasing rates freeze home mortgage market
Texas storm, increasing rates freeze home mortgage market
330 Sackett Street and 72 Hicks Street (Compass, iStock)
Townhouses dominated Brooklyn luxury contracts — again
Townhouses dominated Brooklyn luxury contracts — again
Elliott Management's Paul Singer (Getty, iStock)
Some Wall Street investors trade NYC for South Florida
Some Wall Street investors trade NYC for South Florida
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...