There are plenty of credit unions, banks, and other players willing to step in to the jumbo breach left by Countrywide, et al. When BofA says no to a super-jumbo 40% LTV loan (real case), there are those among the other 7,500+ banks in the country that will step in.
The market will not be as deep as it was, and 30-40%++ of the people previously getting jumbo mortgages will no longer be successful (sub-prime does not necessarily mean low price!).
So, clearly the market will be hurt, and prices will come down dramatically.
However, given financing ingenuity like piggyback loans (yes, they’ll still do those, on top of a conforming loan), this market will not die. It will just be much weaker than it used to be.
