Non-conforming loans nationally accounted for nearly 2 percent of all purchase applications last year, up 33 percent relative to 2010, according to the Mortgage Bankers Association's monthly profile of state and national mortgage activity.
Those loans have tougher standards such as high interest rates and down payments ranging from 25 to 40 percent, according to Mike Fratantoni, vice president of research for the Mortgage Bankers Association.
"They're only available to the best credit borrowers," Fratantoni said.
Financing a purchase with loans above government limits won't get easier until the secondary market grows an appetite for jumbo loans, according to Miller of Miller Samuel.
The secondary market comprises mortgage bankers, savings and loan associations and large private investment institutions that buy mortgages from primary lenders or investors.
MBS Sales
There are signs of revival for mortgage-backed securities, according to Jan Scheck, managing director at DE Capital Mortgage, a New York-based mortgage consulting firm.
Redwood Trust Inc., a real estate investment trust based in Mill Valley, California, has completed four sales of bonds totaling about $1 billion tied to new U.S. home loans since 2010, according to Mike McMahon, managing director of Redwood, which specializes in jumbo loans.
Wells Fargo & Co., the nation's largest home lender, plans to trim credit requirements this year as it aims to increase its loan volume, according to Greg Gwizdz, sales manager for the eastern U.S. for Wells Fargo Home Mortgage. The bank reduced the cost of loans over $2 million last month and is lowering post-closing requirements for cash reserves, he said.
"We're seeing a fair amount of demand, we have a strong appetite and we're doing a lot of volume," Gwizdz said in a telephone interview.
Jumbo Origination
Wells Fargo funded $13.7 billion in non-conforming loans across the nation for the nine month period ending September, the San Francisco-based lender said. In Manhattan its volume of loans without government backing increased 56 percent from a year earlier.