From the New York website: Borrowers with lower incomes are qualifying for jumbo loans as underwriting standards ease up.
Total Mortgage Service, a Connecticut-based firm, saw jumbo loan originations jump from 19 in January to 54 in August of this year. The borrower’s average monthly income dropped from $25,059 in January to $18,567 in August, the Wall Street Journal reported.
That’s due to more demand from buyers and looser underwriting guidelines, Total Mortgage’s CEO, John Walsh, told the Journal.
Both jumbo loan originators as well as investors that buy the loans on the secondary market have eased their standards recently.
California-based LoanDepot.com eased its debt-to-income ratio requirement in 2016 and saw a 17 percent increase in jumbo loan volume in the first six months of 2016 compared with the second half of 2015.
Redwood Trust, a real estate investment trust that invests in mortgage loans, recently launched a loan-purchase program with loosened requirements on FICO scores and loan-to-value ratios. Previously, Redwood would only purchase loans where the borrower had a FICO score of at least 720, and where the borrower contributed a down payment of at least 20 percent. Under the new program, Redwood will purchase loans where the borrower has a credit score as low as 661, and dropped the down payment requirement to 10 percent.
Competition for jumbo loans has heated up because the mortgages are viewed as low risk, Jeff Taylor, a managing partner at mortgage consulting firm Digital Risk said. “Big banks want these loans on their books because of strong performance.” [WSJ] — Chava Gourarie