Soaring U.S. Home Prices Push Jumbo Mortgages to a 17-Year High

U.S. jumbo mortgages reached a 17-year high in 2021 in terms of dollar volume, due to record-low jumbo interest rates and rising home prices, according to a CoreLogic report released Friday.

Different from a conforming loan, which falls within the limits set by Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, a jumbo loan covers a larger-than-normal mortgage.

Jumbo loan securitization, or mortgages that were packaged into federally backed mortgage securities, reached nearly $48 billion in 2021. That was more than double the previous year and the highest level since 2007, according to CoreLogic, an Irvine, California-based data service provider.

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The climb in jumbo loan origination and securitization is a result of higher home prices since the pandemic, as well as historically low rates on such loans, the report said.

Although mortgage rates on conforming loans dropped at the onset of the pandemic in 2020, those on jumbo loans were slower to come down and only reached the all-time low during 2021, according to the report.

On Friday, the national average rate for a conforming 30-year fixed mortgage was 4.21%, and the national average 30-year fixed jumbo mortgage rate was 4.26%, according to Bankrate’s latest survey of the nation’s largest mortgage lenders.

The last peak in jumbo mortgages from 2005-06 was a precursor to the housing market bubble, but such risk is lower due to higher credit scores in 2021, CoreLogic said. Borrowers whose jumbo loan was securitized in 2021 had, on average, a credit score that was 30 points higher than in 2005-06, according to the report.

However, CoreLogic expects that jumbo loan originations and securitization this year to decline from last year, given that the conforming loan limit was raised 18% at the start of 2022, making jumbo loans less necessary, CoreLogic said.

Also, the home prices are projected to grow moderately in 2022 with mortgage rates going higher, which will slow the demand for jumbo loans, CoreLogic said.