Jumbo lending credit retreated last month, pulling down overall availability of a leading home loan product index, according to the newest report from the Mortgage Bankers Association.
On the ground, though, some lenders find certain large-balance transactions proceeding as usual, with data suggesting highly regional variations in today's housing market, while borrowers might see loan-to-value ratios shrink.
The latest numbers may point to differences in regional market activity rather than an across-the-board decrease in credit volume, according to Michael Borodinsky, a divisional builder branch manager at LoanDepot based in Edison, New Jersey.
"My take is there hasn't been a noticeable adjustment in either guidelines or availability of credit per se on the jumbo side," he said.
"We are seeing some tightening of LTVs with regard to declining markets, where markets went up too far too fast, and that, of course, is specifically regional. You're not seeing that yet in the Northeast, for example, but you are seeing it in other markets out West."
MBA's overall numbers showed lenders decreased offerings by 1% between July and August, leading to a reading of 107.3 from 108.4 in its mortgage credit availability index. A lower score indicates credit conditions tightened over the month.
"Credit availability decreased in August, as lenders reduced their offerings of loan programs that require flexible documentation, along with cash-out refinance loans," said Joel Kan, MBA's vice president and deputy chief economist, in a press release.
"Many of these loan programs had jumbo features, which contributed to the decline in jumbo credit availability," he continued.
The latest reading reversed course after credit loosened in July, when the score moved upward by 2.5% over that month.
The jumbo component of the index declined 2.5% month to month, the report said. At the same time, conforming loan availability was largely flat, along with government-backed lending, with lenders having taken a cautious approach in other segments, according to MBA.
What the jumbo data means for business
The jumbo pullback may also represent a reversion to levels from earlier this year after product availability rose over the prior three months, including a jump of 4.2% in July.
Lenders of non-qualified mortgages — whose non-agency transactions often involve the same types of large balances and properties and rely on asset documentation rather than wage income — say that in additional differences, sentiment toward the products may also differ by the institution type.
Whereas the bank space appears to be getting stricter with jumbo and non-QM programs, IMBs are making more of them available, according to Josh Oleesky, a Southern California-based producing regional manager at Certainty Home Lending.
"In our world for non-QM, I feel the appetite is stronger," said Oleesky, who previously served as a banker at depository lenders.
"I don't think it's a dramatic shift in jumbo lending, but I think lenders are becoming more selective around product structure," he added.
It's also "business as usual" for the most part in secondary market securitization takeouts, said Foundation Mortgage Corp. CEO Marc Halpern. Once loans rise above the $5 million mark, though, investors will scrutinize transactions closely, he noted.
"They're really going to dig into not only if they have an appraisal; they're going to go look and do their own due diligence on value," Halpern said.
How other MCAI components fared
Of the main component MBA credit indices in August, government-backed availability remained at July's level, while the conventional segment decreased 1.8% from the prior month. The conventional MCAI comprises two subindices: jumbo and conforming, with the former accounting for most of the overall downward trend during the month.
"Conforming lending standards and loan offerings continue to be conservative, even as mortgage rates are at their highest levels in more than a year," Kan said.
Credit conditions for both main components slowed compared to July, when government-loan availability had increased 1.8%, while the conventional index accelerated 3%
