Foreclosures Up

Jumbo lending has staged a come back what with Fannie and Freddie May pumping in the much needed liquidity in the housing market. In San Francisco Bay area, home sales jumped. Sales of homes that are financed by loans above $417,000 made up for the highest sales. Of course, the numbers are nothing when compared to what it was even three years ago but still many areas in southern California are seeing a comeback of jumbo lending.

Real estate broker Eileen Bartlett, says jumbo lending was always there. But people just did not know where to go for the money. Bartlett feels that credit unions are a better alternative than banks for availing jumbo loans.

The rules of borrowing from a credit union were very stringent earlier. One had to be a member of the union but now the rule has been relaxed. Now living in a credit union’s area of operation is enough for getting a loan.

Bartlett says there is a lot of difference between borrowing from a bank which has its sights on the bottom line and a not-for-profit organization like a credit union. One can ask for a loan and almost always end up getting one, says Bartlett. She is also doing consultation for KeyPoint that gives mortgage loans in counties of San Mateo and Santa Clara.

The situation looks quite dicey. Suburbs that had mushroomed overnight along job centers during the boom time were the first to experience the hardest fall. Foreclosures have become very common in these areas. The problem is when there is a foreclosure in the neighborhood then it pulls down the value of the real estate properties in the area.

Steven Stapp, CEO, San Francisco Federal Credit Union, says the volume of jumbo loan has gone up by almost 25 to 30 per cent than what it was earlier.

KeyPoint has agreed to give jumbo loans amounting to $1 million with very little down payment of 20 per cent. Loans of $1.5 million will be made if borrowers make a down payment of 25 per cent.

Community banks and credit unions may appear as small players in this market. But when put together their impact is a large one. Builder associations say that Fannie Mae and Freddie Mac have come up with many rules that have put a brake on home sales. The new rules have been designed to make appraisers give true value to homes.

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