Super Jumbo Mortgage

[stockbroker]

A Super Jumbo Mortgage is classified in the United States as a residential mortgage or other home-equity secured loan in an amount greater than $650,000, although lenders differ on just what constitutes a super jumbo mortgage subject to their own internal investment criteria. Super Jumbo mortgages are made available to borrowers whose loan requirements exceed the guidelines commonly referred to as Jumbo loan limits, which apply to mortgage loan amounts in excess of the FNMA / FHLMC ("Fannie Mae" or "Freddie Mac") conforming loan limits of 417,000. Unlike Jumbo loan limits, the super jumbo mortgage category is not directly defined, controlled, or regulated by any of these aforementioned agencies. Instead, mortgage lenders internally and independently define their own parameters and criteria for what defines a Super Jumbo mortgage. The minimum loan amount for some lenders to classify a loan as Super Jumbo ranges from $500,000 (with the exception of Alaska, Hawaii, Guam, and the US Virgin Islands where jumbo loan limits on single family residences are $625,000, or 50% higher) to $1,500,000, with maximum super jumbo loan amounts generally running into the $10,000,000 to $20,000,000 range.

[stockbroker]

Super Jumbo Mortgages present an increased risk to the lender in direct correlation with the size of the loan, substantially more than conforming mortgages. The increased risk of Super Jumbo mortgages is firstly due to the lack of "agency" support for these loans, effectively reducing the available pool of investors and insurers for all jumbo mortgages by an order of magnitude. Mortgages in excess of 1 million dollars have an even smaller secondary market of investors, and super jumbo mortgages in excess of 2 million dollars frequently require extensive "sourcing" of private investors prior to funding due to very minimal institutional investor coverage. The complex nature of funding these loans requires the use of Super Jumbo mortgage specialists, whose compensation requirements are generally too prohibitive for retail banks and mass market lenders to accommodate outside of niche geographic areas, leaving much of the business to private concerns. Private Mortgage Bankers generally focus primarily on doing fewer, but larger deals, and thus have a familiarity with how and where to get these larger loans done. Securitization of Super Jumbo mortgages has not met with the same success as conventional jumbo mortgages, although work in this area is ongoing throughout the financial community. The underlying lack of liquidity for Super Jumbo Mortgage securities is compounded by a reduction in lending capacity for the institutions which must service these larger loans; as they lack a ready market for secondary sale the loans remain "on the books" of the lender, tying up capital in servicing that would otherwise be invested again. The assets against which super jumbo mortgages are secured are primarily classified as "luxury" residential real estate, a segment which is highly prone to market volatility in gross dollar terms. Luxury homes also require substantially more time to market in the event of foreclosure.


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