Lenders ease standards on jumbo and non-QM loans
The availability of mortgage credit loosened in January, as lenders increased access to jumbo and non-QM loan programs, according to the Mortgage Bankers Association (MBA).
Mortgage credit availability rose 2.5% to a reading of 99, indicating a loosening of credit standards after months of tight conditions, according to the latest Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA).
“Credit availability increased to start 2025, driven by conventional credit supply rising to its highest level since June 2022,” said MBA deputy chief economist Joel Kan.
The Conventional MCAI, which tracks non-government-backed mortgage credit, rose 3.8%, while the Government MCAI – which includes FHA, VA, and USDA loans – increased by 1%.
Of the component indices of the Conventional MCAI, Conforming index went up by 0.5% while the jumbo index saw the strongest increase, jumping 5.3%. This reflects increased lender interest in financing high-value properties for wealthier borrowers with strong credit profiles.
“There were expanded loan offerings for cash-out refinances, along with more jumbo and non-QM loan programs,” Kan said in the report. “Although similar to last month, these were limited to borrowers with better credit. All other subindexes saw increases in January, a positive development for the spring homebuying season, if these trends continue.”
Interest in jumbo mortgages is gaining traction, with Bank of America (BofA) reportedly agreeing to buy a $9 billion jumbo mortgage portfolio from Toronto-Dominion Bank (TD).
The deal, which remains in negotiation and has not yet been finalized, is part of TD’s effort to reduce assets and comply with US regulatory limits, according to sources familiar with the matter.
Read more: Bank of America in talks to buy $9 billion jumbo mortgages
The jumbo loan portfolio in question consists of mortgages too large to qualify for backing from Fannie Mae and Freddie Mac. These loans are typically issued to high-net-worth borrowers with strong credit profiles, offering higher loan amounts but falling outside government-supported programs.
While jumbo mortgages carry greater risk due to their size, they are often sought after by borrowers with strong financial standing. The market for these loans could expand further if regulators ease capital requirements under Basel III Endgame proposals, which would reduce the amount of capital banks are required to hold against residential mortgage assets. If those rules are relaxed or eliminated, banks may increase their exposure to jumbo mortgages, driving further growth in this segment of the market.
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