Where have all the Jumbo’s gone?
In 1997 Paula Cole came out with the smash hit “Where have all the cowboys gone?” and as I sipped my cup of Folgers (don’t judge me… boujee coffee just doesn’t do it for me) and read this Wall Street Journal article I couldn’t help but sing the catchy tune.
WSJ reported that jumbo mortgage originations have dropped 12% over the last year and are down 27% from their post-crisis peak in 2017 (data was provided by Inside Mortgage Finance). This has created a ripple effect at the big banks who took this product on full force following the crash which has me wondering… what products/programs will help replace the dip in origination volume? Could we see some larger banks charge back into the correspondent market or possibly even enter the wholesale space again (this is 100% speculation) haha… but the rumor mill has been spinning. Wells Fargo had to come out publicly and deny claims that Harvey Schwartz, former CFO at Goldman Sachs would be replacing Tim Sloan as the bank’s CEO… man I’m really reaching for some interesting news here aren’t I?
Truth is there are a lot of factors working against the jumbo market. The new tax laws have made it tough to get the incentives for buying larger homes, the refinance market has dried up (especially for the jumbo products) and there really isn’t a big enough appetite for buying larger homes… as we’ve discussed at nauseam, Millennials having the buying power and they/we can barely afford their student loans. It’ll be interesting to see how this plays out. My guess is that these larger homes are going to drop in value and quite possibly create a little under water feeling… GULP!
In other news… Jerome Powell put a stop to the rate hikes, the global economy is a mess and the 10-year looks so nice tucked under 2.5% (hasn’t been the low since 2016). My advice… dive into your previous client base and try to take advantage of his mini refi boom that is about to take place. Also make sure you check the closing dates and you clearly review the Early Payoff Demand language in your broker agreements!
You can call me if you have any questions!!
I hope everyone has a great weekend despite the fact that only 25% of the March Madness brackets filled out on ESPN are perfectly correct.
Talk to you soon,
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.
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