Thursday, May 15, 2008

Why are CA and FL hit mainly by mortgage crisis? Striking difference between Jumbo and non-jumbo mortgages

I was going through ofheo’s data (Office of Federal Housing Enterprise) and one thing that mainly struck me was the dramatic difference between the Jumbo and Non-jumbo mortgages. In the first chart, the left bar is the Jumbo and the right bar is the non-jumbo. See how traditional was the non-jumbo market with mostly FRMs (Fixed Rate Mortgages). But, we see all sort of exotic things in Jumbo mortgages. We know from anecdotal evidence that this must be true because jumbo loans are unaffordable for a lot of people and GSE’s cannot take and so people try all sort of funny stuff, but now with hard data it is so clear why the mortgage crisis happened. And the second chart on the right, show the all the usual suspects on the top – with CA alone accounting for one-half of all jumbo loans issued in the country.

The scale of exotic stuff in the first chart (about 75% of total jumbo) really surprised me. And in the third chart at the bottom we can see how conforming loan limits have dramatically increased even faster than home appreciation rates in the last 20 years, even without the current government proposal.

clip_image001 clip_image002




No comments: