Affluent homebuyers who previously took out jumbo loans and defaulted on them during the housing downturn are finding that few lenders are willing to work with them again, the Wall Street Journal reports. And those that are willing to lend money to those with a foreclosure in their past are demanding higher down payments and higher interest rates to set off their extra risk.
Strategic defaulters — those who intentionally walk away from their homes — are even less likely to be approved for a mortgage because lenders that originate private jumbos often follow guidelines set by Fannie Mae and Freddie Mac, which require strategic defaulters to have re-established their credit profile for at least seven years after foreclosure in order to get a mortgage, the Journal said.
Those who overcame a financial hardship that was out of their control and have since improved their credit have more options. Some smaller lenders say they are willing to work with private jumbo borrowers in as little as 30 months after after a foreclosure.
And the Federal Housing Administration recently changed a rule allowing borrowers with “extenuating circumstances” to become eligible for FHA-backed mortgages in as little as one year after their foreclosure, down from at least three years.
“This may be an influence on the private lenders to loosen a little bit on their waiting period,” Daren Blomquist, vice president at RealtyTrac, told the Journal.
In most housing markets, mortgages that exceed $417,000 are ineligible for purchase by Fannie Mae and Freddie Mac. Anything bigger is considered a “jumbo” loan. In some higher-cost housing markets, Fannie and Freddie can purchase loans of up to 115 percent of the 2010 median home price, up to a maximum of $625,500. FHA will still back mortgages on single-family homes of up to $729,750 in some high-cost markets.