The Corona Virus pandemic has hit the mortgage world. In the middle of March, a number of lenders, some of them big ones, like Flagstar BanK have decided to stop making non-qm mortgages.
Non-qm mortgages, if you remember, are the type of mortgages that, under Dodd/Frank rules make it less risky for banks to lend and borrowers to own. They have no creative features (no interest only, no terms longer than 30 years, low-ish loan amounts. etc.).
In other words, they’re the type of loans Fannie Mae and Freddie Mac would buy.
Jumbo Loans Are Non-QM Mortgages
Because by definition, the lowest jumbo loan amount possible is $1 above Fannie Mae and Freddie Mac’s limit, they are either portfolio loans (i.e., the bank that makes them holds on to them) or they are sold to private lenders.
Given the uncertainty that the Corona virus has created, some (many?) of the private lenders that normally purchase jumbo loans are not buying, so Flagstar and others have fewer places to sell their loans.
What Does This Means For People Interested In Jumbo Loans?
Fewer buyers means higher prices, i.e., borrowers will pay higher interest rates. Also possible: reserve requirements will be higher, credit requirements more stringent.
In other words, it will be more expensive and harder to get a jumbo for a while.
Impossible, or not feasible any more, for some.