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

Banks to Profit Off Jumbos: Moody's

NEW YORK ( TheStreet) -- Several banks are likely to profit from funding jumbo mortgage loans as the government sponsored enterprises (GSEs) start to retreat from the marketplace, according to Moody's (MCO - Get Report) report.

The largest jumbo loan producers are Wells Fargo (WFC - Get Report), with $14.45 billion in jumbo loans, Bank of America (BAC - Get Report) Home Loans with $12.43 billion in jumbo loans, JPMorgan Chase (JPM - Get Report) with $10.2 billion, PHH Mortgage (PHH) with $8.52 billion, ING Bank (ING) with $6.9 billion and Citigroup (C - Get Report) with $6.70 billion. SunTrust Mortgage (STI - Get Report), US Bank Home Mortgage (USB), Astoria Federal Savings (AF) and Hudson City (HCBK) were also ranked as large jumbo loan lenders on Moody's list likely to make a profit.

"Banks with room on their balance sheets to hold higher balance loans in portfolio will pick up market share from loan originators that depend on selling the loans they originate to the government agencies," Moody's analyst Thuy Nguyen and senior vice president Brian Harris.

Banks originated $87 billion in jumbo loans in 2010, while Fannie Mae (FNM), Freddie Mac (FRE) and Federal Housing Administrationbought $93 billion in jumbo loan mortgages. In September the GSEs conforming loan limits will decline, making it easier for banks to enter the market and profit off of the mortgages.

"We estimate banks will have to fund only an additional $28 billion of jumbo loan a volume after the GSE and FHA's conforming loan limits decline," the analysts said in the report. "The allocation of $28 billion in additional jumbo mortgage volume means a 32 percent increase in each bank's jumbo mortgage portfolio."

Banks won't be the only ones looking to enter the jumbo loan market more aggressively. Private equity funds, REITs and hedge funds are also looking to yield more returns from the jumbo mortgage sector.

"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 said to The Street in a previous article. --Written by Maria Woehr in New York.
1 of 2

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
BAC $14.80 0.03%
C $46.73 0.00%
JPM $63.60 0.00%
MCO $99.10 0.00%
STI $42.07 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs