Instead of selling Jumbo Mortgages on the secondary market, large lenders are keeping them on their books and reaping the profits. That may lead to better terms for borrowers

Jumbo Mortgages -Banks Sweeten Terms to Woo Borrowers

The secondary market for jumbo mortgages—in which banks bundle and sell their mortgages as consolidated debt to investors—is doing worse than a year ago. But that may be good for borrowers, at least for now.

Only 2.3% of all jumbo mortgages originated in the first half of 2014 have been securitized, according to Inside Mortgage Finance, an industry newsletter. That’s a drop in the bucket compared with the peak of 49.3% in 2005.

Now, instead of selling mortgages on the secondary market, large lenders are keeping them on their books and reaping the profits themselves. What’s more, lenders that don’t want to hold on to their mortgages are finding national and regional banks are eager to buy them, says Mathew Carson, a broker with First Capital Group in San Francisco.

In essence, one secondary market was replaced by another, says Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The case could be made that borrowers are better off without a mortgage-backed securities program than they were before,” he says.

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