Jumbo Delinquencies Up

In January, borrowers had a harder time paying their jumbo home mortgages. Sixty day delinquencies on jumbo loans backing mortgage securities rose to 9.6% in the month, up from 9.2% in December and 3.7%  from the year before according to the New York Based Fitch Ratings agency.

“The deterioration in performance is really the combination of two things going on: rising unemployment that took place throughout 2009 as well as our estimate that about a third of all jumbo loans that are current are underwater in terms of the value, so [borrowers] owe more on their properties than they are worth,” according to Fitch Rating’s managing director Vincent Barberio. “As more of these loans become delinquent, they ultimately will come into foreclosure.”

Jumbo loans are not backed by the government sponsored enterprises, GSE, Freddie Mac or Fannie Mae, because the mortgages exceed the conforming loan limit of $417,000, up to $729,750 in specific high cost areas like Los Angeles. Because neither Sallie nor Freddie back them, they do not qualify for modification or refinance under the Obama Making Home Affordable program. In California, which has 44% of all jumbo loans, delinquencies on these mortgages has risen to 11.3% in January from 10.8% in December and 4.1% a year earlier.

If you’re having trouble making your jumbo loan payments, contact your lender immediately. Most of the rebound in the real estate market is at the low end, buoyed by the homebuyer tax credit. Higher priced properties aren’t moving as quickly these days. Looking at California again, sales of homes over a million dollars declined by 23.8% in 2009. Because the top end of the market is moving more slowly, you’re lender is not eager to be stuck with an expensive foreclosure.

As always, a refinance protects your credit better than a loan modification.But if you’re having trouble making your payments, or if you are underwater, you probably won’t get a refi, unless you can convince your lender to write down your principal with a short fi.

It’s more likely for you to get a loan modfication. A key here is solid evidence of financial hardship. Be sure to make a good argument for payment reduction. Loan mods cut interest, stretch out the term and only as a last resort, reduce the principal owed.

Since jumbo loans aren’t backed by government programs, they are usually not made permanent. Most are granted for a fixed period of time to allow borrowers to get back on their feet. Still if a three year respite will let you keep your home while your financial picture improves, a temporary loan mod is an option worth pursuing.

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