A recent story in ASR's sister publication, National Mortgage News, reported that a number of conduits formed to securitize Jumbo-balance loans using private-label securitizations have recently been closed. This is not surprising, considering the continued difficulties the non-agency MBS market faces. Lenders' inability to securitize loans has profound implications for the mortgage and housing markets, and will make the GSEs increasingly indispensable to housing finance.
A cursory examination suggests that the Jumbo mortgage market is reasonably healthy. The Bankrate.com national average Jumbo rate is around 4.60%, roughly 55-60 basis points over the average conforming rate. However, this masks deep problems in Jumbo lending. These rates are available only to very high-quality borrowers with, for example, a combination of 70% LTV ratios and 760 FICO scores. The relatively low level of Jumbo rates reflects demand for strong-credit Jumbo mortgages from depositories looking to add yield to their investment portfolios. More disturbing is the lack of availability of loans to less iron-clad borrowers. They are either forced to pay significantly higher rates or are shut out of the mortgage market entirely, denying financing to a large and important segment of the housing market.