Jumbo mortgage lenders invade Fannie and Freddie’s turf

Private lenders are pushing into the smaller loan market, offering competitive rates

National /
May.May 14, 2021 10:05 AM
Borrowers can now get a 30-year fixed-rate jumbo mortgage for $2 million at 2.65%. (iStock)

Borrowers can now get a 30-year fixed-rate jumbo mortgage for $2 million at 2.65%. (iStock)

With overnight bank funding rates near zero, investors are flush with cash — liquidity they are using to compete with Fannie Mae and Freddie Mac on the secondary mortgage market.

Investors that would typically deal with jumbo loans are creeping into Freddie and Fannie’s territory, financing smaller loans below the agencies’ dollar cap for mortgages, according to a column in the Los Angeles Daily News.

Borrowers can now get a 30-year fixed-rate jumbo mortgage for $2 million at 2.65%, a better deal than what Fannie might offer, the column noted. And they can borrow without mortgage insurance by making at least a 10.1% down payment on loans ranging from about $550,000 to $2 million. Fannie and Freddie, known as government-sponsored entities or GSEs, require insurance.

Private lenders are offering loan-to-value limits of 89.9 percent versus Fannie’s 80 percent. Non-owner-occupied pricing for 30-year fixed-rate loans starts at 2.75 percent, whereas the government-backed companies are offering 3 percent to 3.5 percent for a mortgage of that length, the column reported.

To facilitate approvals, investors are also doing away with antiquated underwriting rules. Some lenders are requiring only one year of tax returns to qualify for a loan rather than the two years preferred by traditional jumbo underwriting.

They also sidestep fees and restrictions such as loan level pricing adjustments and other bumpers imposed by the Federal Housing Finance Agency, which oversees Fannie and Freedie.

[Los Angeles Daily News] — Suzannah Cavanaugh





    Related Articles

    arrow_forward_ios
    A photo illustration of a crystal ball predicting future home prices (iStock)
    Home sales, building to slow: Fannie Mae
    Home sales, building to slow: Fannie Mae
    Zillow economist Nicole Bichaud (Zillow, iStock)
    Where have home values grown more, suburbs or cities? The answer may surprise you
    Where have home values grown more, suburbs or cities? The answer may surprise you
    Where have all the sellers gone?
    Where have all the sellers gone?
    Where have all the sellers gone?
    Eric Wu, CEO and co-founder, Opendoor (Opendoor, iStock)
    Opendoor stock soars on first profitable quarter
    Opendoor stock soars on first profitable quarter
    From left: Black Knight CEO Anthony Jabbour and Intercontinental Exchange CEO Jeffrey Sprecher (Black Knight, Intercontinental Exchange, iStock)
    Intercontinental Exchange expands mortgage play with $13B Black Knight buy
    Intercontinental Exchange expands mortgage play with $13B Black Knight buy
    (iStock, Illustration by Kevin Rebong for The Real Deal)
    Can Hamptons, North Fork markets get any tighter? Yup
    Can Hamptons, North Fork markets get any tighter? Yup
    EisnerAmper chair of real estate services Lisa Knee (EisnerAmper)
    Listings shortage could endure for years, experts say
    Listings shortage could endure for years, experts say
    From left: Mike Rothman, founder and CEO, Second Avenue; Kyle Asher, co-head, Monroe Capital's Opportunistic Credit Group (Second Avenue, LinkedIn/Kyle Asher, iStock)
    Firm aims to tackle the problem with single-family rentals
    Firm aims to tackle the problem with single-family rentals
    arrow_forward_ios

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

    Loading...