Jumbo mortgages are cheap because banks want to sell other stuff to wealthy borrowers

If you’ve got great credit, rates on jumbo mortgages are now slightly less than for conforming loans eligible for purchase by Fannie Mae and Freddie Mac. That’s because banks are competing for wealthy consumers because they can sell them other financial products, Origination News reports.

Jumbo loans are typically costlier than conforming loans because lenders have to keep them on their books instead of packaging them into mortgage-backed securities that are sold to investors. The secondary market for mortgages not backed by Fannie, Freddie or FHA collapsed in 2007 and since then, lenders have been able to securitize only small batches of jumbo loans originated using conservative underwriting standards. Source: nationalmortgagenews.com.


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