Hi I’m Jeff Sibbach, and today I have a special guest…
That’s right, special…
What makes you special?
I have no idea…
Anyway, this is Matt Baker, with the Bookspan Baker Team with Cobalt Mortgage.
That’s right, it’s a mouthful, I know.
And he’s here because of the holiday season to talk about jumbo shrimp.
No, not jumbo shrimp! Jumbo Mortgages! I mean come on, I’m a mortgage guy!
Wait a minute, I thought jumbo mortgages were you know, on the Q.T…
They were, they’re on the down-low…you don’t even know they exist. But let me tell you, well, should we tell them exactly what a Jumbo Loan is? Because they probably don’t know.
Hey, we’re going to try to be informative here. Tell us Matt.
A jumbo loan is a loan over $417,000 in Maricopa County. So, depending on the market where you live like if you live in Sedona, then if you live in Tucson.
What about California?
California’s a whole different ball game.
Ok, so let’s start with Arizona, Maricopa County $417,000. So if you have a loan of $417,000 and 1 dollar, your a Jumbo Loan. And that goes all the way up to 2, 3, 4 million, however far you want to go. So that’s a Jumbo Loan. Alright, so where are we at in the Jumbo Loan market? Number 1, Jumbo Loans are kind of a thing of the past. People didn’t know where Jumbo Loans were going to go…I gotta put a lot down, 30, 40, 50%…
Hold on a second. I mean the other day when Matt said let’s talk about Jumbo Loans…I’m like, we don’t do jumbo loans anymore…and now, everyone’s buying cash in the upper end of the market because you have to put down 30 and 40% to get to the jumbo market, I’m like, this would be a great topic.
This will be a great topic. So, should I continue?
Oh sorry, I gotta talk a little!
I like to talk…so let’s go in to where the market was, right? In 2008 the jumbo market pretty much disappeared, right, no lender was lending on Jumbo Loans and being able to sell it in the secondary market. So, as confusing as that may sound, the secondary market is; loans get pooled up into big pools and get securitized, and sold on the secondary market. That’s what every conventional loan does.
So, essentially, someone like Wells Fargo or Chase, City, B of A, right, they pool loans together and securitize them on Wall Street and sell them in these big pools.
Isn’t that what got us in trouble?
No, that’s standard mortgage practice. Well with Jumbo Loans that went away, and Wells Fargo would do a Jumbo Loan but they would “hold” it. They would essentially “portfolio” it, right?
The “old school” way.
Right, there was no market selling of these loans. Of these Jumbo Loans on the market at all. Well, a new lender came in called Redwood Trust which is a real estate investment trust and they kind of are now ground-breaking back into that securitizing…
That’s funny, “Redwood” ground-breaking…
Haha, right…they’re breaking back in and delivering mortgage-backed securities to the secondary market. Which means the market as a whole is going to be great.
Tell us what’s coming in for Jumbo Loans in 2013?
Alright, 2013’s going to be a really good year. Because now that we have this baseline of product available, which is like a 20% down, refinances available, you could do purchases all the way up to 2-3 million with as little as 20-30% down, which is pretty new.
Coming for 2013 is possible 10% down, which is…
Are you teasing us?
Which is a teaser…but absolutely is coming out is what’s called an Asset Depletion Loan. So there’s a lot of people out there that have millions of dollars in the bank.
The banks are going to deplete my assets?
No, it’s called an Asset Depletion Loan but essentially what it is, is you have a guy that has 10 million in the bank. Ok, but let’s say he’s got 2 million in the bank. But he really doesn’t have a whole lo of documented income that he’s reporting to the IRS every year.
You mean all my private business owners out there.
Correct, right so you have 5-10 million in the bank, but you have really not a whole lot of documented income. There’s a formula that you use to deplete the assets over time, and that’s how much they can qualify in the loan. So they still can get a loan. Even though they don’t have income they can report every year with the IRS. That’s brand new.
Obviously you know this stuff really well.
To learn more, contact me, we’ll get you a hold of Matt, and he’ll explain it to you in full detail. I mean this…
Give me an hour, let’s sit down for an hour and have a conversation.
Alright, Matt, thanks.
You got it.
I appreciate it.