No matter how much lipstick you put on it. Why don’t the members of the House Financial Services Committee understand what probably every mortgage broker or banker in this country has figured out? That labeling a mortgage “conforming” does not make it a lower risk conforming deal if the loan amount is in fact higher. And investors don’t willingly take on added risk without added compensation. Yet these public servants are having a hearing (assuming perhaps that someone must be pulling a fast one) to see why the price of the ambiguously named ‘jumbo-conforming’ mortgages didn’t come down as they expected. Um, maybe because they aren’t really conforming mortgages? Since investors didn’t bite (fool me once, etc.) Fannie stopped packaging them for sale and is holding them in its portfolio. This brought pricing down somewhat but investors on the open market have still shown little interest in these loans.
Loans of higher amounts share certain characteristics that make them greater risks and offer lower returns than their conforming counterparts, according to the Mortgage Bankers’ Association. They are more concentrated geographically and many of the highest-priced markets are also the most volatile. Jumbo borrowers tend to refinance, sell their homes, or retire their mortgages much faster than those with conforming loans, making the servicing on jumbo loans less attractive. Lenders deal with risk, return, supply, and demand every day and understand how it works in mortgage lending. It would be nice if our leaders would take the time to learn about our industry before they started meddling with it.
Mortgage Industry Professionals. Like what you see?
SUBSCRIBE for free by RSS or email, and never miss a post!
