Been watching this thread, and maybe I’m wrong, but I get the sneaking suspicion that what ncounty4 really wants to know is why don’t 90% jumbo loans exist any more? (Not why can’t they personally get the loan) If my hunch is correct, here’s my quick stab at that question.
Banks (and mortgage companies) generally don’t hold mortgages these days. Thus they are only willing to make mortgages that they can sell to someone else. Given that neither investors nor the government are interested in buying jumbos, that means they are not available.
Why don’t investors or the government buy jumbos? The government only buys mortgages for political reasons, but helping people who make a good living but aren’t fabulously wealthy campaign contributors isn’t politically very popular right now. And investors don’t want to buy mortgages for the following reasons.
1) Too much risk. No one knows how far down housing prices are going to go.
2) Government interference. There is lots of concern among investors that any loan you write will get changed for political reasons by the government and the person holding the loan will get screwed. As an investor this simple reason would drive me away from owning mortgages.
3) Lots of investors have had their fingers burned by mortgage backed securities in the last couple of years. After being burned like that it takes a while for people to come back into the kitchen.
Bottom line here is that why in the world would anyone want to hold mortgage backed securities at this time and at the current rates? The profit just doesn’t justify the risks. Thus they aren’t available. (Or when available, only scarcely and at higher rates)
