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News: Jumbo Loans May Be the Next Ordeal Negatively Affecting Our Economy

Jumbo mortgages are home loans with an initial principal amount of over $417,000 in most areas of the U.S.  Other areas may be as high as $729,750.  In either case, it is a limit set by Fannie Mae and Freddie Mac.

Fitch Ratings, a credit rating agency, says the performance of prime jumbo loan performance in the residential mortgage-backed securities (RMBS) category dropped again in January.

The problem is that these loans had serious delinquencies which were 60 or more days past due rose for the 32nd consecutive month and edged closer to a record high 10 percent.

Prime jumbo loan delinquencies have been on the rise since the second quarter of 2007.

In 2009, the delinquency rate nearly tripled during the year.  These serious delinquencies rose to 9.6 percent in January from 9.2 percent in December.

“The new year has brought no relief from declining jumbo loan performance,” said Fitch managing director Vincent Barberio.

He goes on to say:  “The trend line for delinquencies indicates the 10% level could be reached as early as next month.”

California, which has a whopping 44 percent share of the total jumbo market, saw the delinquency rate rising to 11.3 percent in January from 10.8 percent in December.

Delinquency rates rose in 4 other states including New York, Florida, Virginia, and New Jersey.  These states along with California constitute the top 5 states in market share.

The jumbo market in the country is valued at $376 billion and is continually dropping.

Grant Bailey, a senior director for the RMBS group at Fitch, said: “In the 2005, 2006, 2007 vintages, close to 50 percent of borrowers are underwater or negative equity.

That keeps a less than positive pressure on borrowers and, therefore, analysts keep a negative outlook on delinquencies according to Fitch.

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Tags: credit rating, Fannie Mae, Freddie Mac, jumbo loan, st louis home loan experts, st louis home loans, st louis lending, st louis mortgage, st louis mortgage news, st louis mortgage refinancing, st louis refinancing

This entry was posted on Monday, April 5th, 2010 at 9:54 pm and is filed under st louis mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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