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Jumbo Activity Stabilizes

$35.0 billion Q3 securitizations

February 6, 2008

By SAM GARCIA


Third quarter securitizations of jumbo mortgages held up, according to a new ratings agency report. And while a major jumbo lender is optimistic about upcoming activity, activity at one luxury home builder suggests further softening is ahead.

Securitizations of jumbo loans, those over the conforming limit of $417,000, were $35.0 billion during the third quarter, Standard & Poor's Ratings Services reported today. Voume edged down slightly from $35.8 billion in the second quarter.

The modest decrease in the issuance of jumbo residential-backed mortgage securities followed a 26 percent second quarter drop from the first quarter's $48.3 billion, S&P said.

While issuance of jumbo fixed-rate deals was down 12 percent during the latest period, adjustable-rate mortgages saw a 22 percent increase from the second quarter, according to the report. ARMs accounted for about 38 percent of third quarter jumbo issuance, climbing from 30 percent in the prior quarter.

Jumbo mortgage lender Thornburg Mortgage Inc., which briefly halted new business during August as the credit markets were in a free fall, reported Monday that it returned to profitability in the fourth quarter.

The Santa Fe, N.M.-based company, which expects its origination volume to grow, also reported that had a successful $230 million public offering last month as well as a successful securitization at an attractive cost of funds and spread.

"We have begun to see financing conditions improve," Thornburg President and Chief Executive Officer Larry Goldstone said in the earnings announcement.

Jumbo loan activity is closely related to the sale of high-end residences, and Houston Realtor Steven Kleinman of Oakington Realty Inc. sees luxury homes holding up in his market.

Kleinman, who said his company handled more than $40 million in property transactions last year, noted Houston has added more than 75,000 jobs during the past 12 months -- many in high paying fields including medical and energy.

"Those professionals typically seek more upscale residences and locations close-in to their offices," he explained.

Kleinman added that sales of existing luxury homes in Houston will not lag too far behind 2007 sales figures.

But the outlook for high-end home sales isn't so rosy around the rest of the country.

Luxury homebuilder Toll Brothers Inc. announced today that there were 904 gross signed contracts for $573 million during the fiscal first quarter 2008 ended on Jan. 31. Activity fell from 1,073 contracts for $694 million in the fourth quarter and 1,463 contracts for $1,070 million a year earlier.

Toll Brothers said it also saw its average contract price fall to $634,000 from $646,000 in the prior quarter and $730,000 a year earlier.

"The housing market remains very weak in most areas," Toll Brothers Chairman and Chief Executive Officer Robert I. Toll said in the statement. "Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel."

Toll added, "buyers seem to be hiding."

The drop in activity is an indication that jumbo RMBS volume may continue falling through the first quarter of this year.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]


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