USB US Bancorp

By AnnaMaria Andriotis 

Big mortgages are all the rage at the largest U.S. retail banks.

Lending for jumbo mortgages, those that exceed $417,000 in most U.S. markets, surged at J.P. Morgan Chase & Co. and Bank of America Corp. in 2015, according to new data. The banks originated $37.1 billion and $23.3 billion, respectively, of jumbos -- up 88% and 68% from 2014. U.S. Bancorp's jumbo lending increased around 50% to $8.3 billion.

The figures are based on Inside Mortgage Finance's analysis of recently released mortgage data by banks and other lenders under the Home Mortgage Disclosure Act.

Banks have been increasingly targeting the jumbo loan market since the housing bust. Jumbo borrowers tend to be among the lowest-risk mortgage customers because they have higher credit scores on average and make larger down payments. The loans also have a lower delinquency and foreclosure rate than smaller loans, according to mortgage-data firm Black Knight Financial Services.

At some large banks, jumbos now account for a much larger share of mortgages. At Citigroup Inc., for instance, jumbos accounted for 52% of total mortgage dollars originated in 2015, up from 42% a year prior, according to Inside Mortgage Finance. The bank says its total jumbo originations rose 53% in 2015 from the prior year to $19.1 billion.

Regional banks are also ramping up jumbo lending. Regions Financial Corp. says it originated about $1.5 billion in these loans last year, up about 85% from a year earlier. SunTrust Banks Inc. and Citizens Financial Group extended $3.8 billion and $2.3 billion, respectively, up 61% and 76%, according to Inside Mortgage Finance.

By comparison, jumbo lending across all the institutions that reported under the mortgage disclosure act increased 34% year over year.

More recently, there has been a shake-up in the top ranks of jumbo lenders. J.P. Morgan became the largest jumbo lender by volume, based on the loans it originated and bought from other lenders, in the first quarter of 2016. In doing so, it unseated Wells Fargo &. Co., which had held that position since 2010, according to Inside Mortgage Finance.

Most banks hold jumbos on their books, another appealing aspect since banks profit from the difference between the loan's interest payments and the interest they pay out on deposits. The loans are also perceived by banks to be safer because they don't carry the risk of buybacks, should things go wrong, like mortgages they sell to Freddie Mac or Fannie Mae.

One of the results of increased jumbo lending has been the decline in black and Hispanic mortgage borrowers. As jumbos have grown to account for a greater share of mortgage lending, large retail banks have been giving fewer mortgages to minority borrowers, as The Wall Street Journal reported in June. The recently released 2015 HMDA data show a slight uptick in the share of black and Hispanic borrowers who received mortgages to purchase homes.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

October 21, 2016 13:41 ET (17:41 GMT)

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