Overview

Despite interest rates beginning to come down it is still essential for borrowers to continue to shop around. When it comes to jumbo mortgage loans Citigroup are hoping to increase their business by at least 50% during 2010, offering attractive interest rates to borrowers who apply through one of their branches. There has certainly been a turnaround in both New York and California, with more jumbo loan mortgages being granted as the housing market picks up. Despite this, underwriting jumbo loan mortgage applications is still very stringent. However, if the borrower fulfils the criteria required then they can be fairly confident that they will be favourably considered.

More Capital becoming Available

Redwood Trust, a securities’ company based in California, announced this week that it would be releasing $222 million back into the mortgage pool, effectively making around $933,000 available in jumbo mortgage loans for future lenders’ new customers. If lenders are able to move this pool of money on to borrowers it will start the movement of capital that will enable more jumbo loan mortgages to become available. As the jumbo loan mortgage market begins to roll again the interest rates will begin to come down in relation to the interest rates of conforming loans.

Restriction of Mortgage Interest Households could Deduct

The year of 2010 may be getting better for the jumbo mortgage loan market generally, but there could well be a fly in the ointment in the shape of the proposed 2010 Federal Budget. Housing and Urban Development Secretary, Shaun Donovan has been quoted as saying that:

“We want to ensure that we are able to continue to support the housing market in the short term and provide access to homeownership over the long-term, while minimizing the risk to the American taxpayer”.

Nevertheless, despite FHA loans having increased from around 13% at the end of 2009 to 14.36 for the early part of 2010, the FHA capital reserve dropped below that considered acceptable by Congress mandate. Consequently, the Obama Administration has become involved.

President Obama’s Administration has made it clear that it is their intention to restrict the value of mortgage interest rates that some households can deduct against their income: incomes over $250,000 who falls into the 30 – 35% tax bracket. This is equivalent of reducing interest write-off on a 30-year jumbo loan mortgage of $425,000 by $1,100 every year. Furthermore, if the 2010 Federal Budget implements everything that it intends, borrowers are going to have to provide evidence of a more impressive debt-to-income ratio in order to provide evidence to lenders of jumbo loan mortgages that borrowers can still meet the increased after-tax monthly payments.

When you consider that there is far more scrutiny for jumbo loan mortgages since the properties being bought are worth considerable value, it is hardly surprising that properties selling for more than $1 million will, from now on require more than a single appraisal. To get the jumbo loan mortgage market moving will need some considerable forethought, clarity and action to avoid the jumbo mortgage market from stagnating from too few borrowers coming forward with sufficient criteria to satisfy the underwriters from the various lenders who were starting, once again, to offer jumbo mortgage loans this year.