NEW YORK–Big mortgages are taking up an increasingly big portion of some banks’ lending portfolios.
New data show that jumbo mortgages rose to 24% of mortgage approvals at six of the largest U.S. banks in 2015 from 21% the year before, according to an analysis of federal home-loan data by The Wall Street Journal. Jumbo loans, typically worth more than $417,000, have become increasingly popular among big banks in the wake of the mortgage crisis, the Journal reported.
“The latest figures indicate that some lenders are continuing to increase jumbo mortgage lending in response to regulatory pressure and other changes since the crisis,” The Wall Street Journal said. “In 2012, jumbo loans accounted for just 12% of all mortgage approvals at the six banks. The strategy has contributed to a decline in lending to black and Hispanic borrowers, because people in those groups rarely receive jumbos.”
The trend toward the jumbo loans is the result of lenders seeking to be more risk-averse, according to the report.
Jumbos are attractive because they typically feature borrowers with high credit scores, big down payments and low default rates. And they aren’t linked to government programs that help back home loans—programs that cost banks tens of billions of dollars in fines after the financial crisis, the Journal reported.
Many of the big banks are holding jumbo loans on their balance sheets rather than selling them to investors, which allows them to put swelling deposit dollars to use, the Journal report found.