This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wall Street Ready to Go 'Jumbo'

NEW YORK ( TheStreet) -- Some of the largest Wall Street investment managers are preparing to take advantage of the government's abandonment of large mortgages, called "jumbos," and have set up investment vehicles to cherry-pick the best loans.

A report in Wednesday's New York Times says that the real estate market is beginning to shudder at the prospect that government-backed mortgage provider Fannie Mae (FNM.F) will lower its high-cost area loan limits on Sept. 30, effectively backing away from guaranteeing mortgages on higher-priced homes.

The lower limits, which could drop to as little as $650,000 in states like New York, California and New Jersey, are stoking worries that housing prices for the most expensive areas may collapse as Uncle Sam retreats from the market.

But some of the largest investment firms on Wall Street are betting on a profitable, private jumbo loan market and have set up vehicles to fund them.

"We look forward to the potential roll-back at the end of September 2011 of the temporary increase in the conforming loan limits applicable to Fannie Mae and Freddie Mac, which would increase the share of the mortgage market for the private sector and reduce future risk to taxpayers, " said Martin Hughes, president of California-based REIT Redwood Trust (RWT - Get Report), when it announced the closing of a $290 million prime jumbo residential mortgage loan securitization in March.

California-based PennyMac (PMT - Get Report) set up a fund to underwrite jumbo residential loans late last year, according to a report in Reuters. "I feel that real estate is nationally at a bottom," Penny Mac's chief investment officer David Spector told the news service. "From an economic point of view, we're in the camp that things get better in 2011."

Wall Street investment titan BlackRock (BLK) set up its $1 billion BlackRock Mortgage Investors Fund last year that will invest in jumbo loans.

"The securitization outlets have been severely reduced for a whole host of reasons -- regulatory, ratings agency, investor, the list goes on and on," said BlackRock's Randy Robertson in an interview with TheStreet, when the fund was announced in 2010. "For another host of reasons, banks haven't been taking on additional real-estate exposure either. The combination of those two and Freddie and Fannie not accepting larger balance loans, the market's underserved. We want to serve that market."

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
PMT $16.01 -0.31%
RWT $14.20 0.32%
AAPL $109.36 -1.30%
FB $92.42 0.02%
GOOG $635.52 -1.10%


Chart of I:DJI
DOW 16,994.63 +82.34 0.49%
S&P 500 1,995.83 +15.91 0.80%
NASDAQ 4,773.2150 -17.9370 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs