House hunters aiming for some of St. Cloud's more upscale properties may see their home loan applications finding an increasingly welcome reception. That’s the word from the national financial press—and they aren’t whispering. According to The Wall Street Journal, it’s nothing short of “a jumbo shift in the U.S. mortgage market.”
In the world of mortgage lending, the “jumbos” are home loans for amounts that rise above the limits set by the federal reinsuring entities—Fannie Mae and Freddy Mac (they aren’t exactly miniature outfits themselves). In circus lore, the name of “Jumbo” became legendary when, in the late 1800’s, P.T. Barnum thrilled crowds by starring the pachyderm of the same name—at that time the largest captive elephant in the world—in the center ring of his “Greatest Show on Earth.”
Today, the St. Cloud home loans that borrow his name may not be elephantine, but they are larger than average. While one might think that lenders would view the larger loans askance, since more money involved would carry greater risk. You’d think they would give greater scrutiny and be more reluctant to lend for the same reason. But there are more and more indications that the opposite is true: jumbo loans are rising in popularity among lenders.
Financial commentators point to a number of reasons. CNBC cited the drop in interest rates as the cause of what they branded a “refinance boomlet” in the jumbo sector. After last week’s post-Brexit dive in mortgage rates, more borrowers had a larger incentive to refinance. CNBC found an average contract interest rate for 30-year fixed rate jumbos falling “to their lowest level since January 2011.”
The National Association of Realtors® found reason to point to the same conclusion—and provided a rationale explaining why “the jumbo mortgage business keeps getting bigger for banks.” In the wake of the mortgage crisis, with regulators pressuring banks to avoid anything that even smacks of risky lending, jumbo applications “typically feature borrowers with high credit scores”—a feature banks find newly appealing. “And,” according to the realtor.com website, “they aren’t linked to government programs that cost banks tens of billions of dollars in fines after the financial crisis.”
All in all, the gist of the news should gladden the hearts of any resident looking to buy or sell the level of home that warrants one of those St. Cloud jumbo loans. For sellers, it means that a greater number of consumers may be able to comfortably afford a jumbo home loan, broadening the pool of potential buyers. For buyers, it could mean that “more house” is newly within reach. For either eventuality, I hope you’ll give me a ring!