Jumbo Mortgages: Big Banks Still Love Them
October 21 2016 - 12:56PM
Dow Jones News
By AnnaMaria Andriotis
Big mortgages are all the rage at the largest U.S. retail
banks.
Lending for jumbo mortgages, those that exceed $417,000 in most
U.S. markets, surged at J.P. Morgan Chase & Co. and Bank of
America Corp. in 2015, according to new data. The banks originated
$37.1 billion and $23.3 billion, respectively, of jumbos -- up 88%
and 68% from 2014. U.S. Bancorp's jumbo lending increased around
50% to $8.3 billion.
The figures are based on Inside Mortgage Finance's analysis of
recently released mortgage data by banks and other lenders under
the Home Mortgage Disclosure Act.
Banks have been increasingly targeting the jumbo loan market
since the housing bust. Jumbo borrowers tend to be among the
lowest-risk mortgage customers because they have higher credit
scores on average and make larger down payments. The loans also
have a lower delinquency and foreclosure rate than smaller loans,
according to mortgage-data firm Black Knight Financial
Services.
At some large banks, jumbos now account for a much larger share
of mortgages. At Citigroup Inc., for instance, jumbos accounted for
52% of total mortgage dollars originated in 2015, up from 42% a
year prior, according to Inside Mortgage Finance. The bank says its
total jumbo originations rose 53% in 2015 from the prior year to
$19.1 billion.
Regional banks are also ramping up jumbo lending. Regions
Financial Corp. says it originated about $1.5 billion in these
loans last year, up about 85% from a year earlier. SunTrust Banks
Inc. and Citizens Financial Group extended $3.8 billion and $2.3
billion, respectively, up 61% and 76%, according to Inside Mortgage
Finance.
By comparison, jumbo lending across all the institutions that
reported under the mortgage disclosure act increased 34% year over
year.
More recently, there has been a shake-up in the top ranks of
jumbo lenders. J.P. Morgan became the largest jumbo lender by
volume, based on the loans it originated and bought from other
lenders, in the first quarter of 2016. In doing so, it unseated
Wells Fargo &. Co., which had held that position since 2010,
according to Inside Mortgage Finance.
Most banks hold jumbos on their books, another appealing aspect
since banks profit from the difference between the loan's interest
payments and the interest they pay out on deposits. The loans are
also perceived by banks to be safer because they don't carry the
risk of buybacks, should things go wrong, like mortgages they sell
to Freddie Mac or Fannie Mae.
One of the results of increased jumbo lending has been the
decline in black and Hispanic mortgage borrowers. As jumbos have
grown to account for a greater share of mortgage lending, large
retail banks have been giving fewer mortgages to minority
borrowers, as The Wall Street Journal reported in June. The
recently released 2015 HMDA data show a slight uptick in the share
of black and Hispanic borrowers who received mortgages to purchase
homes.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
October 21, 2016 13:41 ET (17:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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