Jumbo home loans making a comeback on LI

Jumbo loans, which practically disappeared from Long Island in the mortgage crisis, may be making a comeback.

These are home loans of more than $729,750 here, and their return indicates the last segment of the Island's home sales market is beginning to edge back from the cliff, said mortgage and real estate experts. That's key on Long Island, where homes in the jumbo range are not rare, and Wall Street honchos help drive Hamptons and North Shore housing activity.

"It'll start sales going all along the price spectrum," said Michael Fratantoni, vice president of research for the Mortgage Bankers Association. "Enabling refinances for these higher loan balances is going to give some upper-income people some additional money to spend on other things."

Agents say more contracts have gone through, while lenders say they're relaxing terms and doing more jumbo loans. Big lender Chase, for example, reported closing $1.4 billion in jumbo loans nationwide for the first quarter of the year, versus $400 million for the same period last year.

Another sign is increased activity in high-priced areas of Long Island, where jumbo loans are more prevalent. Hamptons and North Fork closings in the first three months of this year shot up 142 percent over the same time last year, or 488 sales vs. 201, reported appraiser Miller Samuel.

While the federal home buyers tax credit had been potent in sparking a domino of sales in lower and middle price ranges, many owners of expensive homes were unable to downsize, refinance or sell when buyers couldn't get jumbo loans.

"There was a complete holdback on them," said associate director Laura Zambratto at Daniel Gale Sotheby's International Realty, which targets the North Shore. Many buyers had to pay all cash, she said.

Jumbo loans are not insured by Fannie Mae, Freddie Mac or the federal government, so terms are tougher. Lenders that gave such loans had to carry the risk unless they found investors to buy jumbo - and that wasn't happening.

Since the subprime collapse in 2007, jumbo applicants have had to plunk down as much as 50 percent instead of the usual 20 percent, said Michael McHugh, head of Continental Home Loans in Melville.

Last year, 217 loans were made on Long Island, down from 7,321 five years ago, said CoreLogic, a mortgage data provider. While jumbos in 2005 began at $359,650, a floor that has been raised twice during the crisis, they were still uninsured and considered riskier.

"The piece of the puzzle that really accelerated things was the view that high-end property values, if they weren't at bottom, they were close to it," said Jim Linnane, northeast division manager for Wells Fargo, a major lender for the Island. "In the New York market in particular, we've seen things stabilize on Wall Street, which is a big driver . . . in terms of the jumbo market."

That means investors are less afraid of home values declining in jumbo loans.

A few weeks ago, a real estate investment trust sold securities backed by $222 million in prime, jumbo loans made by Citibank last year. It was the first such private-sector sale in about two years. "There are investors looking for high-quality asset," McHugh said. "People are starting to recognize that the loans being originated today are of much higher quality."