Doron F. Eghbali Residential Real Estate Law Blog on Lawyers.com

Why Should We Be Concerned About CA High-End Housing Market?

Monday, March 15, 2010 by Doron F. Eghbali

There is a real concern about California's high-end housing market. In fact, even the most affluent have not been immune to the travails of the "Great Recession". The borrowers of such homes-like other borrowers-have witnessed the value of the properties plummet while their mortgages either rise or keep steady. This has resulted in owning homes worth less than the mortgage and incomes not able to support this financially destructive imbalance.

FOR THE 33rd CONSECUTIVE MONTH DELINQUENCIES ON JUMBO MORTGAGES IN CA ROSE

In fact, for the 33rd consecutive month, in February, delinquencies on jumbo mortgages-mortgages from $417,000 to $729,250 and TOO large for government support-rose, according to Fitch Ratings. In addition, Fitch Ratings reports 11.6% of prime jumbo mortgages in CA ARE 60 days delinquent or more.

REAL REASONS FOR CONCERN

Borrowers Owing More than $729,250 on Their Mortgages Cannot Refinance: The government two years ago increased the limit on jumbo loans from $417,000 to $729,250. This meant the government would guaranty a portion of such loans so that lenders felt more secure of any potential default in their lending to such borrowers. However, many people have mortgages higher than the new limitation and CANNOT refinance.
Banks Require At Least 20% Down Payment On Jumbo Loans: The reality is while banks have relatively significantly tightened their lending spigots-that is they require at least 20% down for jumbo loan loans-many borrowers either do not have enough equity to cover refinancing or are extremely wary of putting more cash into a plummeting asset.
Any Fallout Will Be More Tangibly Felt in CA Than Other States: In fact, California has the highest concentration of prime jumbo loans with 44%, the state with the highest jumbo share-after CA- is New York with 7%, according to Fitch Ratings. This reality makes this looming fallout a very costly one.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law Advocate Group, LLP. He Primarily Practices Business, Real Estate and Entertainment. He Can Be Reached at: 310-651-3065. For More Information, Please, Visit: HERE.

Posted at 09:36 AM

Topic: Residential Real Estate