Bigger Loans Provide Bigger Opportunities

Ken Jacobson, CMPS
Jumbo, Super-Jumbo, Conforming and Government mortgages available. 713-369-4040 at www.kenjacobson.com

Texas has always been a land of great opportunities, where two of the most important things are owning your own home and having a self sufficient, optimistic outlook for the future. It’s no secret that Texans take great pride in their innovation, pioneering spirit and ability to rise to the occasion when presented with an opportunity to tackle a new challenge or take advantage of developing trends.

The changes in the housing market in recent years have had a significant impact on the economy nationwide.  While The Lone Star State was not left untouched: there is good news.  Due in part to the foresight of the framers of the Texas State Constitution (which provides arguably the strongest home protection regulations in the country), Texas has fared far better in the housing market than many other areas of the nation. The motivation for these laws dates back to the bank panic of 1837, during which many Texas homesteaders lost their properties to bank foreclosure. The result was a decision to ensure, by state code, that the financial investment of property owners would be protected. In 1997, when the matter of allowing Texans to tap into the equity of their home was being considered by legislators, there was vigorous lobbying to guarantee adequate protections for homeowners. The most significant of these laws limits homeowners to a maximum of 80 percent of the property’s appraised value. In more recent years, Texas has seen a large influx of new residents in the aftermath of the Katrina disaster, as well as many simply seeking an opportunity for better jobs and the desire to experience the state’s unique culture.

While the market is starting to show signs of stabilizing in most of the country, the outlook is even better in Texas.  Property values are on the rise, and mortgage rates are low. Currently, Texas has one of the best housing markets in the US.  This is borne out by information shown in the Texas Quarterly Housing Report for the first quarter of 2010, which provides even more reason for an optimistic outlook. The report, which is released by the Texas Association of Realtors and reviewed by Texas A&M University, reflects a strong end to the first quarter. Experts are optimistic that the second quarter promises to show additional growth due to increased demand for properties by new residents.

Traditionally, there has been hesitation by some banks to offer lower interest rates and competitive closing costs in Texas.  This is due in part to the more complicated compliance requirements resulting in more costly specialized training for loan officers, closers, and processors. But, with states like California still struggling to stabilize, many banks are starting to see Texas as an attractive market, especially in the area of Jumbo Loans.

Jumbo loans, which, in the vast majority of states, are loans over $417,000, became very difficult to obtain after 2007. While the Housing and Economic Recovery Act of 2008 raised jumbo limits in some states (not Texas), and subsequent legislation has extended the sunset of this incentive through 2010, most lenders have been reluctant to accept these limits resulting in higher rates persisting on luxury properties.

Fannie Mae and Freddie Mac buy most of the mortgages in the country, providing the means for mortgage lenders to recycle their capital and make more loans.  The inability to sell jumbo mortgages to these entities has created a lack of available funds for those wanting to buy more expensive homes in recent years. In April of 2010, it was reported that while credit requirements remain a primary concern for financial institutions, lenders have started to find new ways to make jumbo loans profitable. This innovation means that while mortgage companies still have to keep these mortgages in their portfolio, they are becoming more eager to make jumbo loans again.

The recent sale of jumbo mortgage securities, which marks the first in two years, is another sign that these loans are making a comeback. The sale, which consisted of a $235 million bundle of jumbo loans, was highly sought after by private investors and received a top rating by the well known financial research company, Moody’s Investors Service. While the jumbo market is currently dominated by the larger players, smaller institutions are also starting to cautiously reenter the arena, and even a small number of credit unions have started offering jumbo products again.

It is no surprise that Texas has its fair share of high-end homes.  As more lenders decide to compete for the jumbo market, buyers can expect mortgage rates and closing costs to become more competitive and higher dollar loans to be more readily available. Jumbo loan rates have recently plummeted to their lowest levels in years. While jumbo rates were hovering between seven and eight percent a year ago, they are presently in the low-to-mid five percent range for a 30 year fixed and the four percent range for a 15 year fixed.
The increasing availability of lower interest rates and the commitment made by lenders to offer more attractive jumbo loan programs offer motivated buyers new opportunities to benefit from the attractive pricing on luxury properties. As more people catch wind of the trends and are willing to make the financial investment of upgrading to their dream home, choice properties will become scarcer. Those willing to take advantage of this change in the market in coming months will be able to sit back and enjoy the mayhem as latecomers to the game scramble to snatch up the remaining inventory, and property investors are able to demand premium prices for the best properties.

For up-to-date information regarding the mortgage and financial industries, please visit Ken Jacobson’s website, www.kenjacobson.com.

Ken Jacobson, CMPS
Call today! Jumbo, Super-Jumbo, Conforming and Government mortgages available.
713-369-4040   www.kenjacobson.com

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