Jumbo Mortgage Defaults Soar

Banks and investors brace for a new wave of defaults as jumbo loans default
By Jim O'Neill,  Newser User
Posted Jan 28, 2009 8:33 AM CST
A real estate fields calls during an open house to sell a $1.5 million home on the Intracoastal Waterway in Hollywood, Fla.   (AP Photo/Marianne Armshaw)
camera-icon View 2 more images

(Newser) – Jumbo mortgages are now going south at an alarming rate, reports the Wall Street Journal, as affluent Americans face mounting layoffs and see their stock portfolios shrivel. Nearly 7% of prime jumbo loans—which average $750,000—were at least 90 days delinquent at the end of 2008, up from 2.6% a year earlier. That's three times the default rate of non-jumbo prime loans.

“There is more pain to come,” says an analyst, as banks and investors start feeling the fallout. Particularly hard hit will be JPMorgan, which loaded up on jumbo mortgages in 2007 and held on to them last year. "We were wrong," says CEO Jamie Dimon. "We obviously wish we hadn't done it."