3 ms·

I think the bigger point is that the jumbo loans aren't backed by Fannie and Freddie so if the risk of default is similar then it does make sense to prefer to l

I think the bigger point is that the jumbo loans aren't backed by Fannie and Freddie so if the risk of default is similar then it does make sense to prefer to lend to people who need conforming (under the jumbo limit) loans. Of course, if you consider "wealthier buyers" they may have quite a few properties, and are more likely to have the resources legally to "go bankrupt" without it impacting them personally. See our POTUS for an obvious example. So they may be more likely to default by choice because it won't ruin their lives and increase the relative risk of lending to them.

bradleyjg 7y ago
> I think the bigger point is that the jumbo loans aren't backed by Fannie and Freddie so if the risk of default is similar then it does make sense to prefer to lend to people who need conforming (under the jumbo limit) loans. In the case of conforming mortgages the banks aren’t lending at all. They are filing out paperwork and skimming off the top.
- tempsy 7y ago
  This is what the Fed has done for both recessions. It’s a bailout.