February 8, 2010
Those With Jumbo Loans Are Struggling
What is a jumbo loan?
• A jumbo loan allows for individuals to borrow over a certain amount.
• Amount: $417,000 from 2006 to 2008.
• Then the amount was increased in the beginning of 2008 to $729,750.
• Now back down to $417,000.
What market is this type of loan aimed toward?
Usually, high income families looking to purchase larger homes would request a jumbo loan, but between 2000 and 2008 the prices of average homes reached above average prices forcing middle class individuals take jumbo loans as well.
Pros and Cons
• A positive attribute of a jumbo loan is that it allows for an individual to borrow greater loan amounts.
• Jumbo loans are risky for lender because unlike the traditional loans they will not be able to sell the loan to a secondary market like Fannie Mae and Freddie Mac.
• Borrowers of this type of loan will have to pay extra to their lenders because of the high risk involved.
Facts about jumbo loan holders today
• Increase in delinquency rates began in 2007 and nearly triple in California with an 11.3% reported delinquency rate for January 2010.
• Florida, New Jersey, New York and Virginia also had the highest amount of jumbo loan delinquencies compared with other states.
Leading factors to current delinquency rate
• Underwater mortgages
• Job losses
