Jumbo Mortgages Caught Up in Subprime Fallout

Daily Herald (UT) (04/22/08); Case, Brendan M.
In addition to borrowers with blemished credit, lenders trying to cope with the subprime meltdown also have tightened their purse strings against high-end home buyers looking to finance an upscale property. Subsequently, consumers taking out mortgages for more than $417,000 are likely to find themselves paying more interest than someone of a similar credit background applying for a smaller loan. The trend is evident in the difference between two key interest rates over the past year, with rates on 30-year fixed conforming loans falling to 5.87 percent from 6.75 percent but interest on 30-year fixed jumbo loans bumping up to as high as 7.5 percent in recent weeks from 7 percent a year ago. Prime jumbos actually carry less risk than similar-quality conforming loans, but a troubling twofold increase in jumbo delinquencies over the past 12 months has put lenders on notice. The pullback, according to some observers, could explain a deepening downturn in some high-end housing markets that are experiencing sales and price drops.