As the name implies, a jumbo mortgage is a loan above conventional limits. The standard is set by Fannie Mae and Freddie Mac. At the time of publication, the conforming loan limit across the U.S. is $417,000. In high-cost areas, loans are considered jumbo when in excess $729,750. Although most jumbo mortgages don't qualify for modification through the federal Home Affordable Modification Program (HAMP), you may still be eligible for a loan modification through your lender.
Problems with a Jumbo Loan
A jumbo loan carries a jumbo-size risk for the lender. Lenders often require two appraisals on the home before extending you a loan. To compensate for the risk, lenders also require you to put down a large down payment and charge you a higher interest rate than on conventional loans. These "luxury" homes are often more susceptible to market highs and lows. Since jumbo loans are harder for buyers to get, you may have difficulty reselling your home.
Depending on when your home was purchased and where, you may actually still qualify for a loan modification through HAMP. During 2008, Fannie Mae and Freddie Mac loan limits were raised from $417,000 to $729,750 in expensive market areas. These loans were considered conforming and still qualify for modification through HAMP. Although HAMP is the most widely known loan modification program, it is not the only one available. Your lender can modify your loan through a private program, if approved.
Private Loan Modifications
Contact your lender at the first sign of struggle to discuss your options. Avoiding foreclosure is always in the lender's best interest. Foreclosure is costly for the lender, especially when the foreclosure occurs on a jumbo loan. Contrary to popular belief, a loan modification won't necessarily lower your mortgage payment. Depending how far behind you are on the loan, a modification may actually increase your payment. A modification is designed to restructure your payments and help you get back on track to avoid losing the home. To qualify for a modification, you'll need to have suffered a financial hardship resulting in a loss of income. Common hardships include unemployment or a family illness.
Loan modification programs usually require at least three missed payments before you can apply. When trying to refinance, it is important to act before you fall behind on your payments. Good credit is also essential when you try to refinance. Refinancing options for jumbo loans include fixed-rate mortgages, adjustable-rate mortgages, and interest-only mortgages. An 80/20 split allows you to refinance the loan into two separate mortgages. The first mortgage amount is just under the limit of being classified as a jumbo loan. The remaining balance is carried into the second mortgage loan. This gives you a lower interest rate.
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