Believe it or not, the most wealthy borrowers are having many of the same mortgage issues that plague the industry. According to Les Christie of CNNMoney.com, 12% of U.S. mortgages of $1 million or more were late in the fall, which is twice the rate for loans under $250,000 and almost triple the default rate on million dollar mortgages 12 months earlier.
A few years ago, it was very easy to get a jumbo loan (loans over $417,000) and the jumbo loan premiums were as low as 0.2%. Today, the premiums are about 0.8% and were as high as 1.8% in 2008. Now, underwriters are looking for far more than the traditional 20% down (some lenders ask for loan-to-value ratios closer to 60% or 50%), meaning higher down payments.
These new requirements are not surprising, especially given the current financing climate. Even consumers with large cash assets (in the millions) are having trouble qualifying if their taxable income does not support payments. These homeowners and buyers are getting turned down for loans. Many underwriters are sticking with their strict guidelines rather than looking at the whole application. I do not expect this to change anytime soon.