Jumbo Loans Easier to Find By Nick Timieaos The Wall Street Journal 04-30-2010

Jumbo Loans Easier to Find
Mortgage Money Available for Expensive Homes; Credit Standards Remain Stiff
By Nick Timieaos
The Wall Street Journal
April 30, 2010

Getting a jumbo mortgage is becoming a little easier for home buyers in the New York area.

Jumbos in the tri-state area are mortgages that exceed $729,750, the limit set to receive government backing or for lenders to sell the loans to mortgage-finance giants Fannie Mae and Freddie Mac. Since the mortgage crisis, banks haven't been eager to make large loans without federal protection, so the market for such mortgages suffered, crimping sales of expensive homes.

But more lenders have been stepping up their offerings of jumbo loans, even though most of the large mortgages will stay in the lender's portfolio. "The rust has slowly been shaken off as banks re-learn how to do portfolio lending," says Keith Gumbinger of HSH Associates, a financial publisher based in Pompton Plains, N.J.

The New York region is benefiting from having a large array of financial institutions that make loans--from national lenders and investment firms to credit unions and smaller banks. That means even though the crisis has made credit guidelines more stringent, "there is definitely more money available," says Melissa Cohn, president of brokerage Manhattan Mortgage Co.

Some banks, like Hudson City Savings Bank, a thrift based in Paramus, N.J., and Astoria Federal Savings, a Queens, N.Y., lender, have long had a hand in the jumbo market and didn't retreat when private money fled as the credit crisis worsened. Together, the two regional lenders accounted for nearly 6% of all jumbo lending in the country last year, according to Inside Mortgage Finance.

Astoria's jumbo lending volume doubled in the second half of the 2009 from the first half, according to Inside Mortgage Finance, even though it reduced its maximum loan limit to $1.5 million, from $2.5 million.

Bigger banks have also gradually increased jumbo offerings. On Monday, Citigroup Inc. will drop rates to around 5.6% on 30-year fixed-rate jumbo mortgages with down payments of at least 25%. "There are a lot of really good buyers who are underserved today, particularly in high-end markets like California and New York," said Sanjiv Das, chief executive of Citi's mortgage unit. He says the bank hopes lower rates will help "energize" those housing markets.

At J.P. Morgan Chase & Co., jumbo activity increased in every quarter last year, according to Inside Mortgage Finance. A lending official says the bank is reducing minimum down payments to as low as 20% in markets where prices appear to have bottomed.

Credit unions have also become a popular jumbo outlet. "They certainly filled the void locally...You used to never see a credit union do mortgage lending," says Guy Cecala, publisher of Inside Mortgage Finance.

Long Island's Teachers Federal Credit Union offers jumbo loans up to $1.5 million with 20% down, while Bethpage Federal Credit Union will make loans up to $2.5 million, though it requires a 45% down-payment on those loans.

Meanwhile, rates on jumbo loans have also fallen to their lowest levels in years. Last week, the average 30-year fixed-rate jumbo loan carried a 5.76% rate, just above the all-time low of 5.55% in June 2003, according to HSH Associates.

"Hybrid" adjustable-rate mortgages that carry a fixed rate for the first five years are now as low as 4.25%, down from 5.25% one year ago, says David Adamo, chief executive of Luxury Mortgage Corp., a mortgage bank in Stamford, Conn.

"The availability of money has improved and the price of that money has improved," says Mr. Gumbinger of HSH. "No one would characterize it as great, but slowly but surely, things have been getting better."

Indeed, underwriting standards are still very tight, with most lenders requiring minimum credit scores of 740 and down payments of at least 20% for loans up to $1 million and 30% for loans up to $2 million.

And until those standards relax, analysts say that a modest improvement in mortgage lending might not have a big effect on sales on a market that depended heavily on easy lending during the bubble.

"You don't have 35-year-old investment bankers putting 10% down on $4 million apartments," says Jonathan Miller, president of New York appraisal firm Miller Samuel Inc. "That knocks a large group of people out of the pool."