Friday, May 8, 2009

Why Pay Attention to the Jumbo Mortgage?

You know, I’ve seen a lot of mortgage experts decry jumbo loans as mortgages used to purchase luxury real estate. Like we were still living in the 1970’s, when a gallon of gas costs 32 cents and the single family sold for 50 thousand dollars, instead of 2009. Lots of people need to wake up and realize $417,000 in today’s housing market isn’t luxury.

This brings me back to the point of my title for this post. Actually, It should probably read why in the world do you care about jumbo mortgages enough to write a blog about them? Well, once the image of Lucy telling Ricky “you got a lot of splaining to do” gets out of my head. It becomes quite clear. Today, May 2009 the Jumbo mortgage is the most unadulterated mortgage product on the market. Think about that.

The federal government can throw mountains of cash at TARP, Fannie Mae, Freddie Mac, AIG you name it. The financial system has become so far removed from the capitalist free market system that natural indicators of the market movement are useless. Supply and demand, GDP, import/export, unemployment etc. out the window as far as economic indicators are concerned. There’s just too much government manipulation. Then consider the FED’s influence on the mortgage interest rate and money supply  and where can you possibly go to gauge what’s happening in the mortgage and housing industry.

Well if you are a DC insider in the mortgage, homebuilding, finance, realtor complex you may have a clear picture of where the economic foundation sits and what the future may hold, but I don’t have that luxury.

Now, let’s consider the jumbo mortgage used as an economic indicator. It does retain some stability to the traditional mortgage industry before things got crazy and out of hand ( I just love using technical terms like that). This is a mortgage product tied to the guiding economic principals which exhibit natural constraints that can’t be found elsewhere. The jumbo rate is probably the most unmolested indicator we have in today’s market. When taken in total with the origination and funding figures,the jumbo mortgage offers the truest reflection of our residential lending capacity.

Anyway, that is one of my motivations for maintaining this site. If you disagree write your own blog. Then again, I am always open to and welcome discussion, feel free to enter the fray.

Ps……. Last post I promised to enlighten you on how to get a Jumbo loan without getting a jumbo mortgage. If you already know the answer, buh bye see you next post.  If you know it and want to stick around to sling a cheap shot…. Don’t.  I’ve owned mortgage companies and was and continue to be truly astonished by how many loan originators, processors  don’t have a clue to the answer until you point it out to them. It just never dawned on them. So the answer is ….drum roll…..please.

Get two loans! Look, if the confirming limit is $417,000 and you need a mortgage for $500,000. Run the first for the limit and do a second for the difference.  Why get spanked on the entire $500,000 with a jumbo rate when you only have to pay the premium on the difference you need to make up? Of course this assumes you’ve got the LTV et al to do the deal. It also comes in handy when your lender doesn’t want to do a deal because of restrictions we discussed in the previous posts. Anyway, there you have it a jumbo loan without a jumbo mortgage.