Jumbo Loan Rates: Jumbo Mortgage Rates Suffer from Delinquencies Near 10%

Feb. 8 (FreeRateUpdate.com) – Serious delinquencies on jumbo loans increased for a mind boggling 32nd straight month according to Fitch Ratings (http://www.fitchratings.com/). “The new year has brought no relief from declining jumbo loan performance,” said Managing Director Vincent Barberio. “The trend line for delinquencies indicates the 10% level could be reached as early as next month.” Prime (good credit) jumbo mortgage delinquencies of 60 days or more rose to 9.6% in January. About 66% of these jumbo loans are in 5 states alone, Calfiornia, New York, Florida, Virginia, and New Jersey.

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Effect on Jumbo Mortgage Rates

Residential mortgage-backed securities push mortgage rates in the opposite direction. If prices of MBS go down, mortgage rates go up. We can reasonably assume that higher delinquencies on jumbo mortgages lower the value of their bonds because they become less profitable. We have to assume if the value of the bonds go down, demand, and price goes down also. As a result of the price going down, jumbo mortgage rates go up. This is likely a major reason we are seeing jumbo mortgage rates a full percentage higher than conforming and FHA loans. It’s also a likely reason jumbo availability is limited and underwriting guidelines so strict.

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