From a plugged-in tipster late last week:

Just got an email from my mortgage broker…countrywide is now requiring 25% down payments on jumbo mortgages in the bay area.

No word on whether or not that’s both wholesale and retail. Can anybody confirm?
UPDATE: We’ll consider it confirmed. And in a related reader report:

I spoke to a reputable agent at length over the weekend about the mortgage market. He said the main players left still writing San Francisco mortgages were the big money center banks (citi, BofA, etc). He said most are requiring 20% down these days. He spoke of one client who did a 10/10, but the second 10% was guaranteed by the guy’s employer (~1.2m purchase price). It is pretty amazing that someone “in the market” for 1m+ home can barely scrape together $100K.

He also said the total debt/income ratio was going down from a previous 65% (wow!) to something like 45-50%. He said the bank tightening really only kicked in heavily in the last week or two which implies the market probably is not reflecting this yet.

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Comments from “Plugged-In” Readers

  1. Posted by SFLooking

    I can confirm this as I just spoke with my Contrywide broker.

  2. Posted by anon

    I wonder if BoA will do the same?

  3. Posted by location

    Is that sort of the same thing as saying they will no longer be providing jumbo mortgages?

  4. Posted by kthnxybe

    Is that the same thing as saying they won’t be providing mortgages in the Bay Area at all?

  5. Posted by lefty

    …or it might mean that suddenly it’s the 1970s and seller financing will be back in vogue?
    this is not good.

  6. Posted by Trip

    I suspect this was the only option to being able to find a market to securitize jumbo loans (FNM/FRE don’t accept them). With a hefty downpayment, the borrowers are far less likely to default and thus potential buyers of these mortgages will be comfortable buying them. This trend will likely further drive down sales volume, but at least it will permit jumbo loans to be available at all, at least to the smaller population able to put a large amount down. A positive development and a return to sanity IMHO.
    Anyone know if this applies to conforming jumbos (a significant piece for the entry level SF market)?

  7. Posted by CameronRex

    This will definitely drive sales volume down. I think the average person, when considering how many years of living hand-to-mouth will be required to scrape together a down payment for even a run down property, will opt to rent and live comfortably. Its too bad that responsible borrowers are being punished for the irresponsibility of mortgage lenders and some borrowers of the past few years.

  8. Posted by San Fronzischeme

    It took a long time for them to wake up and smell the coffee and now they’re overshooting. Typical downturn behaviour.

  9. Posted by Foolio

    Since SF buyers are foreign multi-millionaires wih bushels of GOOG stock, I don’t think this changes anything.

  10. Posted by fluj

    Has anyone written a 10% offer in some time? I think we’re talking about a shift from 20 to 25 here. That’s not insignificant, of course. Are there any mortgage brokers who can speak to this? I guess what I’m asking is, was Countrywide the last lender selling 10% or 10-10 loans?

  11. Posted by eddy

    What they are trying to prevent are zero down purchases since people with zero down / zero equity have no real disincentive to walk away from the home/loan. I’m sure this is happening quite a bit around the country. Well, at least people are not repaying the loans on underwater homes.
    A cynic might say that requiring 25% down on Jumbos means that the regulators think there is 15-25% of bubble left to burst???

  12. Posted by dogboy

    @ foolio
    A VERY SMALL % of SF buyers are foreigners. For properties under 2 million, the percentage is close to nil.
    As for cash-rich folks looking for investments, multi-million dollar homes in SF are not it.
    When prices fall enough banks will reduce down payment amounts on jumbos.

  13. Posted by location

    fluj raises an interesting point. are we talking about a change from 10-25 or 20-25? any plugged in mortgage brokers out there?

  14. Posted by ex SF-er

    dogboy: Foolio was being sarcastic.
    also: banks will certainly not reduce downpayment amounts on jumbos while prices are falling!!! it will make them even more skittish to loan. Put it this way, if someone came to you for a home loan after 5 consecutive years of falling house prices, would you reduce the downpayment amount???? (a variant of the “vicious cycle”)
    banks will reduce the down payment amounts once housing has stabilized and shown a few years of steady gains. (a variant of the so called “virtuous cycle”)

  15. Posted by Ryan

    thats a big ‘ol down for us everyday folks.

  16. Posted by 94114

    I believe Foolio was being sarcastic.

  17. Posted by San FronziScheme

    As prices go on heading lower in many parts of the BA, these 25% will be easier and easier to come by.

  18. Posted by Dude

    Not completely unrelated – anyone see this article in the SF Business Times? 1/5 luxury millionaires planning to let “investments” go back to the bank this year.

  19. Posted by badlydrawnbear

    Looks like “immune” SF just caught a very serious cold.

  20. Posted by fluj

    “Looks like “immune” SF just caught a very serious cold.”
    Excellent analysis. Thank you ever so much.

  21. Posted by dub dub

    @Dude: while I don’t doubt “middle class millionaires” might lose a property or two, your linked article references a “survey” from that armchair millionare guy (probably coinciding with his new book).
    Methodology isn’t discussed — But like astrology, it certainly sounds plausible, and tells you pretty much what you want/need to hear.

  22. Posted by Loaner

    This is confirmed. My Cwide broker wants 25% down on a new place that i am shoppping for, and the same guy let me by my place for 10% down in 2000.

  23. Posted by jasper2008

    Classic. I spend the last 5 years saving getting my FICO perfect, refusing to take out toxic loans and saving 75k (to me, a TON of money). Hoping to put 10-15% down next year on a small starter house within my price range (~120k year salary) in Santa Cruz.
    Seems like the universe is trying to keep me from buying a home in the Bay Area. Maybe I should listen?
    P.S. That 75k is currently in an IndyMac Money Market account, no joke. The government is telling me not to worry, and I know it’s FDIC insured, but I’m still sweating bullets.

  24. Posted by SomaShopper

    Anybody have ideas on what this means for units in contract at One Rincon and Infinity that haven’t closed yet? Waiting for second Infinity tower sales, but seems like it’s going to be a while and hope (?) lower price point.

  25. Posted by ibanker123

    I spoke to a reputable agent at length over the weekend about the mortgage market. He said the main players left still writing San Francisco mortgages were the big money center banks (citi, BofA, etc). He said most are requiring 20% down these days. He spoke of one client who did a 10/10, but the second 10% was guaranteed by the guy’s employer (~1.2m purchase price). It is pretty amazing that someone “in the market” for 1m+ home can barely scrape together $100K.
    He also said the total debt/income ratio was going down from a previous 65% (wow!) to something like 45-50%. He said the bank tightening really only kicked in heavily in the last week or two which implies the market probably is not reflecting this yet.

  26. Posted by Dude

    dub dub – No idea on the methodology, and I agree that drawing broad conclusions from any survey may be specious. But the implication of the article is that 1) this is not a subprime problem and 2) the bay area is not immune. Guess we can wait a year and see what happens to foreclosures/prices in prime SF.
    But hey, speaking of armchair millionaires, Kiyosaki is hosting his “Learn To Be Rich” seminar here in the Bay Area this week. Hope you all have your tickets.

  27. Posted by Trip

    Jasper2008 — that is pretty impressive to save that kind of money (and you’ll get every penny from your IndyMac account — far better place to have stashed it than the stock markets recently). There is a real silver lining to your predicament — you’re not buying a place at what it still close to a peak in prices. A few years from now prices will be significantly lower (should be able to afford something grander than a starter home), you will have saved some more, and it may not matter if down payment requirements have eased because you’ll have enough. You should be happy and consider this a bullet dodged.

  28. Posted by urban_angst

    The rent v. buy analysis is getting closer every week – and its moving from both ends!

  29. Posted by JohnK

    We are stuck in a vicious cycle: Home prices are falling thereby reduing LTV ratios, banks are reluctant to lend due to decreasing value of their portfolios, willing and able buyers are no longer able to get loans due to bank’s fear of dropping LTV ratios, home prices continue to fall due to reduced “demand”, LTV ratios fall further making banks more reluctant to lend….and so on…and so on…. The banks got themselves into this, but they will not be the ones to get them selves out.

  30. Posted by view lover

    jasper, trip is right, at least you did not lose your savings in lost equity.
    One of the things that is not usually mentioned here are the closing costs. If you are buying into a new development, the buyer is responsible the transfer tax along with other closing costs. So you will need the 25%, closing costs, transfer tax, and depending on what time of year, property taxes that may be due. It really will be much tougher.

  31. Posted by Spencer

    I have a friend who bought a one bedroom condo in beginning of june for $765K with 10% down. While the down payment requirement may now be going from 20 to 25%, it has quickly gone from 0 to 10 to 20 to 25. Not sure how long it takes for change to be reflected in sales, but clearly we are beginning to turn the corner.

  32. Posted by Trip

    Oh, and with the illegal MLS monopoly over information now busted by the DOJ ( realtor commissions in coming years will be lower too. Yet another of many reasons to hold off on any purchase.

  33. Posted by David

    Fluj, not only did I write an offer with 10% down, but I got it accepted and the loan funded (offer made May 15, closed June 28).
    However, it was conforming, so probably not germane, until fannie/freddie blow.

  34. Posted by anon

    25% down? Holy cow. That means people need to actually put up real money to buy SF RE. How come? I guess Fluj’s pouncing buyers will be pouncing a bit less now. LoooooooooooooooL

  35. Posted by anon

    Not to worry. Ben will open the discount window also to you starved SF RE buyer. An old car, some kitchen appliances you don’t need anymore. Whatever you have. Ben will accept it as collateral. Then you are all set to participate in the next 20% up the market is going to move this year.

  36. Posted by KK

    From my SF based mortgage broker:
    Wonder why that broker is considering Countrywide. Even though they are sort of capitalized and soon to be purchased by BofA, Countrywide is really just a big mortgage bank. There model is to close loans via retail, wholesale and/or buy closed loans on the secondary market and immediately fill up securities and off them to Wall street. Because jumbo loan securities are still covered in a nasty strain of financial ebola….the model is busted.
    Their saying people need to come up with 25% on a purchase is just another way of reducing the risk in the closed asset. Most lenders have baked it in the rate. With this 25% move…Countrywide ship sails even further from the loading docs. From where I sit, at a long time A-Paper shop, Countrywide has always had really crappy rates…always.
    I have a few places that are doing jumbo loans with good rates to 80%…and allowing secondary financing (although nobody has 2nds over 80%). These are not securitization operations…but rather institutions doing really smart loans to keep on the books. Lending out of their own pockets until the money runs out.

  37. Posted by tipster

    Not only does this affect the buy side, it affects the sell side even more.
    Option arm holders are going to all have to sell. There’s no way they’ll qualify.
    The inventory next year will start to seriously rise, just as very few people who need to refinance can qualify to keep the homes they have.
    Should be an interesting year next year.

  38. Posted by Zap

    Am I the only one really happy about this?

  39. Posted by Ryan

    tipster’s post at 1:22 brings up an interesting point: this affects re-fi’s as well as new loans. Another cliff on our way down the hole.
    FWIW, we did 10% down on a non-conforming loan as recently as 6 weeks ago.

  40. Posted by 1st time buyer

    So what if prices go down in a few years. By then, interest rates will be sky-high. For the people sitting on the sidelines, it will still be too expensive to buy. Blast.

  41. Posted by San FronziScheme

    He also said the total debt/income ratio was going down from a previous 65% (wow!) to something like 45-50%.
    65%? WTF were they thinking?
    No wonder they’re in such a mess.
    A bank should have strict guidelines. If it lends to someone who gets overextended after a certain limit (rule of thumb: 35-40%) they should be liable for part of the loan in case the buyer bails out.
    But anything over 40% and there’s little room for error for potential resets, economic problems (lost job) or other unforseen problem that can happen to anyone.

  42. Posted by ex SF-er

    first time buyer:
    not necessarily.
    it is better to buy a house with a low price and high interest rate, than a hous with a high price and low interest rate.
    the reason: in the end you may be able to refinance into a lower rate. you can’t refinance into lower principal.
    remember, people pay based on “monthly payment”. these new rules will likely mean that home prices need to drop dramatically so that new buyers can afford the houses. it will weed out all the people who took out suicide loans. So you will compete (in the future) for homes with other rational individuals, and not competing with idiots with a huge credit line like in the past.
    as example, we make 350-400k/yr range. we were outbid for housing by a person on social security and once by a janitor. the reason: they were willing to do a NINA Option ARM to overpay. We weren’t.
    in the end, if you are responsible it will be better for you.
    going forward you will likely see less “housing is an investment” and more “housing is housing”. this will reduce “demand” and thus lower prices.
    the thing that can ruin this: if the govt persists in its attempt to keep housing prices aloft. This is what may close you out of the market. Govt subsidies keeping people in homes they can’t afford, and keeping new buyers out of the market due to artificially high prices.
    home simply cost too much. way too much. they are a drain on our society.

  43. Posted by sparky

    This is for jumbo, so it doesn’t affect anything under $925,000 or so, if you put 20% down; and you don’t need to put 25% until you get to $990,000.

  44. Posted by jasper2008

    Hmmm….I hadn’t really considered that there could be some upside to my situation, “Bullet Dodged” as it were. I’ve been splitting rent of a house by the beach in Santa Cruz to save money (my share only $1,500 month). Love to have my own place, but perhaps the pendulum swing may work to my advantage as others have mentioned.
    P.S. If you’re ever looking for a change from the city, Santa Cruz has turned out pretty sweet for me. I can commute to my job in Palo Alto in 50 minutes, and the home rental market there is pretty good right now with many a homeowner waiting out the storm by renting their places. There’s some deals to be had if you do your homework.

  45. Posted by Trip

    1st time buyer, you’re far better off with lower prices even if higher interest rates take some back. In the mid-90s after the last (much smaller) bubble had popped, buyers were paying about 9% for non-conforming loans, but they bought at great prices and have seen huge equity gains as a result. With lower prices, you have a lower basis for building equity and need only a smaller downpayment, all else being equal. You can refi when rates come down, or pay off a loan. You get a tax deduction for interest. Your property taxes are based on the purchase price. Don’t buy into any talk that there is any advantage to buying now because rates may go up.

  46. Posted by nowonderitcostssomuchhere

    What are the reserve requirements like? We’ve been trying to line up construction financing and the reserve requirements are enormous from some of the banks. We’re talking requiring literally YEARS worth of liquid assets (excluding retirement accounts) in reserves. Is it a little easier on the plain ole’ mortgage side?

  47. Posted by badlydrawnbear

    @sparky … while the post didn’t state exactly I am assuming CW is meaning the standard definition of jumbo, +417k, which would be most of SF (excluding TICs).
    although we might need to clarify that.

  48. Posted by John

    Commuting for 50 minutes each way and you think it is OK?
    I lived in Santa Cruz before. It is a nice small community, and I like it there. However, HW17 sucks and kills, and I get backache every time I drive it.
    Heck…50 minutes is too long even if it is easy-to-drive 280. 100 miles per day can easily cost you $20/day. That’s about $500/month, not counting the wear-and-tear and maintainance on your car, and the extra insurance to cover the longer distance driving.
    And you are wasting 2 hours/day of your life. Think about all the stuff you can do with the time, whether to get ahead at work, or just for enjoyment.
    If I were you, I would pay $700/month more on rent to get a place in Palo Alto instead of commuting from Santa Cruz.

  49. Posted by Enthano

    “This is for jumbo, so it doesn’t affect anything under $925,000 or so, if you put 20% down; and you don’t need to put 25% until you get to $990,000.”
    So for the SF “lower end ” of the market this doesn’t even apply, and for those at the “higher end” this probably doesn’t present much of a problem – am I missing something?
    Also, regarding the discussion on low interest rate versus low purchase price, until very recently haven’t interest rates matched historic lows? If so, I would be very surprised to see interest rates go down anytime soon (if not increase significantly). This plus the first point made (again, assuming I’m not missing something) might re-jigger this calculation.

  50. Posted by jasper2008

    Thanks Jon, good points….I work from home twice a week, so the commute issue is somewhat less than if I had to do it 5 times. Hwy 17 is really no problem for me anyway, I guess I’m just used to it.
    Plus, who cares about having an extra 2 hours a day if you have to spend them in Palo Alto? I mean, it’s boring as all hell here, “dude heavy” silicon valley bar scene, and IMHO can’t compare to beach living. I went surfing this morning before work, and have a bike ride to Monterrey this weekend. $20 bucks a day? A small price to pay 🙂
    Sorry guys, off topic….Suffice to say that there’s pros and cons, and in my case, the pros outweigh the cons. To each his own!

  51. Posted by sparky

    I was told that this 25% is for the higher definition at $740,000 by a Mortgage Broker.

  52. Posted by yosemite

    for conforming loans, countrywide did just increase the down payment requirement from 10% to 15%, but the 25% down with countrywide applies only to mortgages over the $729,750 jumbo conforming limit.
    i know this because i was just approved for a loan with countrywide on saturday (two days ago), and it was not for 25% down.

  53. Posted by fluj

    So at Countrywide 20 down will work for up to 912K or so.

  54. Posted by boomstick

    well at least Boom Dizzle and the French can buy houses!

  55. Posted by boomstick

    yeah and that “G” guy…whatever.

  56. Posted by HomeBuyerInTheNewReality

    My wife and I are buying our first new home together, and just went through the mortgage approval process, and I can confirm this. We have plenty of income, less than 15% D/E ratio, and we could afford payments way above the conforming limit.
    All lenders state it is their new policy that absolutely all jumbos now require 25% down.
    This article only tells half the story. Even if you put the cash down for a Jumbo loans the rates are way up. Check out and plug in some numbers, it’s pretty shocking.
    If you keep underling the new conforming loan limit, 20% and for a few lenders 10% was still available, with great rates. But crossing that $729,750 number is now a lot bigger deal than it used to be.

  57. Posted by KK

    “All lenders state it is their new policy that absolutely all jumbos now require 25% down.”
    You get an F for false. No soup for you.

  58. Posted by HomeBuyerInTheNewReality

    “You get an F for false. No soup for you.”
    Ok, then, who?

  59. Posted by I don't like soup.

    Certainly no-one that believes gives a true idea of interest rates!

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