So I'm not surprised these banks don't want to touch jumbo loans right now. That debt is their risk. They can't wash their hands of it if it goes tits up.
I'm in the middle of a refi w/large national bank and my broker mentioned he's not really writing jumbos except for refis for current customers.
I'm confused what type of mortgages does this apply to? Is a conventional 20% down mortgages owned by the government somehow?
This came about after 2009 financial crisis, once regulators realized the banks were playing fast and loose with mortgage lending. Unlike TARP, they inherited that debt and have held onto ever since.
My impression was:
- conventional is within risk margins of banks and they own that risk
- fha requires pmi, that is insurance you buy to cover the extra bank risk
- va, mortgages to veterans that the government own
In my case, 30 days after we closed on a conventional loan, the bank sent us a letter stating the loan was transferred to Fannie Mae. They would continue to do the servicing of taking payments, collections, and closing for the next 30 years, hopefully. But SOP is close on the loan and send it to FannieMae.
The old days when you would closed the loan the bank would immediately package it and shop it around. Prior to the financial crisis your loan would constantly be moving around as if it was being traded on Wall Street, which it was. People were sending checks to banks that didn't even hold the loan.
I don't think that happened to me, the bank kept taking my money so I assumed the owned the house that I was paying them back for.
> The old days when you would closed the loan the bank would immediately package it and shop it around
This is probably mortgages 101, but why was that the case? Is it, in general, more favorable to sell off mortgage liabilities or where there conditions that made that true?
One reason to sell a mortgage is to get the money back. Instead of making money slowly over 30 years, you get some fraction of that as a lump sum plus your principal is returned. Some investors want the steady payout for more, others want fast turnover for less.
There never was a return to the markets as pre-2008, meaning there never was a recovery.
Oh my bad. So riddle me this. Does the government secure mortages it owns?
Low rates are a function of your total risk not your perceived status as a responsible borrower.
The lender is using logic(the refi equation was almost certainly devised and reviewed by a qualified actuary)
In case it wasn't clear, the original commenter was referencing this part:
>>“I told the guy at the bank, ‘I’m trying to use logic here,’” Adler said in an interview. “And he said, ‘That’s your problem.’”
For an example of what an "unregulated hellscape" looks like, take a look at the world of cryptocurrency and how common it is for people to get all of their property stolen.
Oh look everyone its another armchair economist who insists his conveniently specific definition of capitalism(You know the one that must be the case so his beliefs are not a self-inconsistent train wreck) is the absolute definition handed down to us by the word pope and sourced from a magic dictionary stored under his papal throne. The first time in the history of the internet.
According to my alternative word pope if every bit of ownership isn't private and it isn't devoid of regulation it can't be considered capitalism. See how easy it is to make up a definition then argue from it like its gospel.
Alternatively you could accept the much more reasonable circumstance that economies are messy things. Although some stress one economic principle more than another none can be purist in nature.
Lender: "No, because your loan isn't secured by the government"
Wealthy Borrower: "I am just using logic here, you're telling me a riskier borrower with lower credit than me can refi?"
Lender: "If their loan is secured by the government, yes"
Wealthy Borrower: "I don't understand"
Lender: "Well at least we agree on something"
Are you really using logic? Seems like a dubious claim to me. Capitalism is a harsh mistress Mr.1%. Don't like it move to Denmark.