A recent article in the Wall Street Journal confirmed what we are seeing in the Jumbo Mortgage and Luxury Home arena. During the financial meltdown, most banks quit underwriting jumbo loans and super jumbo loans entirely. Thornburg Mortgage, a big secondary market player, saw their credit lines dry up and one of the biggest players in the jumbo market over the prior years eventually had to shut its doors. Why is this all important to Luxury Home buyers, you may ask? It is quite simple really. As the Luxury home markets expanded during the tech/stock boom of the 90's and then the real estate boom of the 00's more and more buyers were lured into the market segment by utilizing financing, some of it highly leveraged. With no financing available, those who needed to sell had to find cash buyers. Obviously, the number of cash buyers was quite small and many were forced to give up their homes, putting more downward pressure on values. Prices were way over-inflated and a correction was eminent, but the lack of financing made a terrible problem even worse.
The good news from the banks is that jumbo financing is on the rise and more available. The article mentions Wells Fargo and J.P. Morgan Chase but my experience is that ING has been real aggressive in offering jumbo financing and are quickly taking market share. The affluent will recover as will everyone eventually and they have taken the stance that relationships developed now will pay off even more down the road.
Thursday, January 6, 2011
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