Bargain hunters may still rule the market, but high-end real estate is gaining momentum, and many lenders are looking to take advantage.
After years of slimming down, banks in southern New England and across the country are regaining their appetite for “jumbo” home loans, the large mortgages on expensive properties that carry higher risks and rewards than conventional loans.
In the first half of 2012, banks lent $72 billion nationally in jumbo mortgages, a 36 percent increase from the first half of 2011, according to estimates from industry researcher Inside Mortgage Finance. Jumbo lending also rose 6 percent in the second quarter of this year from the first quarter.
Enthusiasm for high-value loans, which typically cannot be sold to the federal government, appears to be highest among the large national banks. In the first half of this year, Wells Fargo, the top jumbo lender, more than doubled the amount it put into large loans in the first half of 2011, according to Inside Mortgage Finance. Wells Fargo made $20.5 billion in large loans in the first six months of the year, $12.9 billion more than Bank of America, which produced the second-highest total.
The largest mortgage lender in Rhode Island, Bank of America has made a push to bring in more jumbos and so far in 2012, high-value loans make up 25 percent of new originations nationally, compared with 10 percent in 2011, according to bank spokesman Terry Francisco. Although the bank doesn’t release regional or state-by-state figures, he said the figures were likely representative of New England.
Most of that new jumbo activity, about 80 percent, is in refinances, Francisco said, as homeowners look to take advantage of historically low rates and attractive, new jumbo products that reflect them.
“Most of them are refinances, and that is typical of most lenders today, but we do have a focused effort to bring in more jumbos and expect to do so as the housing market recovers,” Francisco said. “We offer discounts in pricing for [jumbo] customers who have a relationship with Bank of America.”
As an example of those discounts, Bank of America is offering customers with $250,000 in the bank a 50-basis-point reduction in discount points on a jumbo loan.
Some local banks are also diving into more large loans, partly because sales of large and luxury homes have been picking up this year along with the rest of the real estate market.