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A jumbo loan is one that exceeds local conforming limitations set by the Federal Housing Finance Agency – meaning it is too large to be purchased by Fannie Mae and Freddie Mac. Usually that indicates the loan exceeds $510,400 in most areas (though the threshold is greater in high-cost regions).
These loans, often used to purchase pricier homes, are considered risky because they cannot be sold to Fannie and Freddie.
Individuals with conventional loans have been offered the option of entering into forbearance agreements – temporarily pausing payments for up to one year – as a form of relief under the CARES Act. Many Americans have taken advantage of this assistance. In fact, about one month into the national lockdown nearly 3 million Americans were in forbearance.
However, support for homeowners with jumbo mortgages was not specifically addressed in the relief package since they are not backed by the government-sponsored entities.
“Jumbo lenders don't have to offer forbearance, unlike conventional and government-guaranteed lenders,” Holden Lewis, a mortgage expert for NerdWallet, told FOX Business.
But if you are in a position where you do not think you will be able to make a full payment, contact your servicer right away, Lewis advised.
Before you call, Lewis said you want to be clear about what you are asking for. That means you need to know how long you won’t be able to make full or partial payments.
And be prepared to hand over proof.
“The servicer will probably want documentation to back up your request, such as pay stubs, recent bank statements — whatever you have that can document your interruption in income,” Lewis said. “Be prepared to give an updated list of assets, including savings and investments. You might be expected to draw from your savings.”
Meanwhile, data from Redfin shows that jumbo loans have taken a big hit during the pandemic as mortgage servicers tighten their lending criteria – some lenders have even stopped issuing them altogether. Jumbo loans fell 37 percent in March, compared with a 2.7 percent decline for conventional loans.
“COVID-19 has significantly impacted the lending industry in many ways over the past few months and jumbo loans have been one of the first products taken off of the shelves,” Redfin mortgage adviser Katie Bradner said in a statement.