J.P. Morgan, Citi in jumbo-mortgage push
Wednesday, Jul 01, 2009
J.P. Morgan, Citi in jumbo-mortgage push
By Amanda Fung | Crains New York
The stalled jumbo mortgage market in New York may be showing signs of renewed life. J.P. Morgan Chase & Co., one of the nation’s largest lenders, is launching a pilot program later this summer to buy jumbo loans from other mortgage lenders. The move follows a similar announcement from Citigroup Inc. earlier this year.
J.P. Morgan plans to launch its program with a small percentage of mortgage bankers that it buys jumbo loans from, according to a spokesman. Scant details of the new program are available, but the spokesman said borrowers will need to be J.P. Morgan checking customers.
“We are just rolling it out,” said the spokesman. “If it makes sense we will expand the program.”
Industry experts say the New York market could get a boost from such a program because properties in Manhattan, especially those that are north of $1 million, would become more financeable, especially for people who can afford to put down enough cash equal to 20% to 30% of the purchase price of a $1-million-plus property.
“It makes a big difference—it will lower the cost to purchase these properties,” said Ross Weinstein, managing partner of Union Square Mortgage. “People who shy away from these purchases are now back in the market.”
So far, two of the largest mortgage specialists in the city Guardhill Financial Corp. and Equity Now have not been invited by J.P. Morgan to participate in the program.
“Theoretically we will be part of the program,” said Michael Moskowitz, president of Equity Now, which has seen a 2% dip in its jumbo-loan-origination business since last year. “It won’t be a big boom but business will increase. The J.P. Morgan program is a step in the right direction.”
Other big banks are also returning to the jumbo-mortgage business. Earlier this year, Citi resumed offering jumbo loans to qualified retail customers and began buying jumbo loans from other mortgage banks. Last week, it added a small number of brokers to its jumbo offerings, according to a Citi spokesman, who did not elaborate on these relationships.
Guardhill Financial has not seen much jumbo mortgage business from Citi,according to the mortgage company’s president, Alan Rosenbaum. Guardhill has a mortgage-brokerage relationship with Citi, but most of Guardhill’s jumbo loan business is being done through smaller banks, he said.
Guardhill, which also originates conventional loans to qualified buyers, has been selling its conventional mortgages to J.P. Morgan. However, it hasn’t started on the jumbo side, according to Mr. Rosenbaum. (J.P. Morgan, which recently resumed its jumbo loan business via its retail bank branches, stopped using mortgage brokers in January.)
“Hopefully,” he said, “they realize as a mortgage specialist we can aid them in securing high quality loans.”
Jumbo loans are above the conventional loan limits, from $417,000 to $729,750 in the New York area, so Fannie Mae and Freddie Mac do not buy or guarantee these loans. Therefore it is considered riskier debt for many lenders. The big banks pulled out of the jumbo mortgage business a few years ago when the nation was hit with a wave of defaults.
This time around, mortgage specialists say guidelines for jumbo mortgage borrowers will be stricter to guarantee the quality of these loans. A few years ago there was no income check for borrowers, noted Mr. Moskowitz.
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