Todd Vitale, a personal trainer who opened his own gym last year, said he was having difficulty getting a mortgage of more than $700,000 to buy a home in Greenwich, Connecticut, because his new business was untested.
Vitale then tried Wells Fargo & Co., the biggest U.S. home lender, where he kept most of his savings in an account he opened more than a decade ago, he said. He worked with the bank’s private mortgage unit, whose clients are entitled to loans of up to $6 million and personalized service, and had the opportunity to explain that he had already run a similar business and could make the gym succeed. Wells Fargo approved his 30-year fixed-rate mortgage of more than $700,000, he said.
“I don’t think I would have gotten a loan unless Wells Fargo private mortgage gave me a shot,” said Vitale, 38, who moved in to his new 3,000 square-foot home in February. “I would have had to walk away from the home.”
Jumbos, or loans of at least $417,000 in most areas, are one of the few thriving pieces of an otherwise shrinking mortgage market. The biggest banks, including San Francisco- based Wells Fargo, JPMorgan Chase & Co. and Bank of America Corp., are ratcheting up efforts to win wealthier borrowers while keeping credit tight for almost everyone else. Lenders are allowing assets in accounts to serve as collateral in lieu of down payments, cutting rates if customers have or set up investment accounts, rolling out new adjustable-rate jumbo mortgages, and accepting lower down payments.
Applications Increase
“Jumbos are growing while almost everything else is dead,” said Paul Miller, a banking analyst at FBR Capital Markets Corp. based in Arlington, Virginia. “Big banks need loan growth. If they were getting decent commercial loan growth, they wouldn’t be so aggressive on competing for jumbos.”
Applications for jumbo mortgages of at least $729,000 increased 4.9 percent in March from a year earlier, while requests for loans of less than $150,000 fell by 21 percent, according to the Mortgage Bankers Association. The average purchase application loan amount reached $280,500 in the week ended April 18, the highest since the survey started in January 1990, the MBA said.
Jumbos, also called non-conforming loans because they exceed the limit for government-backed Fannie Mae and Freddie Mac to guarantee, are loans of more than $625,500 in pricier markets such as Manhattan and Los Angeles. They’re generally made to the most creditworthy borrowers with FICO scores of 760 on average and held by banks instead of being packaged into securities and sold to investors.
Job Cuts
Plunging mortgage lending at Wells Fargo and JPMorgan, the second-largest U.S. mortgage lender, dragged down their first- quarter earnings. Both banks are paring staff, with New York- based JPMorgan reducing the number of jobs at its mortgage unit by 30 percent, or 14,000 positions, since the start of last year. Wells Fargo got rid of 1,100 jobs in its residential mortgage business in the first quarter to keep expenses in line with demand for loans. Bank of America, the fourth-largest mortgage lender, swung to a surprise loss in the first quarter on costs tied to mortgage disputes.