Production of jumbo mortgages at First Republic Bank and Flagstar Bank increased on a sequential basis in the third quarter. Volume was driven by refinances as interest rates fell during the quarter.
JPMorgan Chase Bank issued a deal this month that looks like it will meet requirements for favorable capital treatment by the OCC. The transactions could prompt similar issuance by other banks.
A proposal by the FDIC to decrease disclosure requirements for certain non-agency MBS issued by banks largely found support from industry participants. However, MBS investors and consumer advocates raised concerns.
Several borrowers are opting for mortgages with balances right at the conforming loan limit even though interest rates on jumbos are often lower. Relatively tight underwriting standards for jumbos look to be the cause.
If banks meet the safe harbor requirements, the FDIC won’t reclaim assets from a non-agency MBS if a bank is subsequently placed in conservatorship or receivership.
If the mortgage industry doesn’t change the way flood risk is assessed, lenders could begin to “blue-line” certain areas, refusing to lend due to unacceptable flood risk, according to a paper published by the San Francisco Fed.