Homepoint adds jumbo ARM to meet demand

Homepoint is adding a jumbo adjustable-rate mortgage product to its wholesale menu as demand for these loans increases amid higher interest rates and home prices.

These loans are available in amounts up to $2.5 million, with a maximum loan-to-value ratio of 80% based on the borrower's credit score, amount and purpose. It is a qualified mortgage product, with a minimum credit score of 700.

It has seven- or 10-year fixed rate periods and afterwards the loan adjusts every six months. They are indexed to the 30-day average Structured Overnight Financing Rate. A six month adjustment is a common feature with these loans.

Homepoint first rolled out SOFR-indexed adjustable-rate mortgages last November for conventional and agency high-balance borrowers. It had discontinued Libor ARMs at the beginning of the pandemic because of low demand and the pending elimination of that index.

"Homebuyers today have a stronger interest in adjustable-rate mortgages because they provide a solution to affordability issues caused by the recent increase in interest rates," Phil Shoemaker, president of originations at Homepoint, said in a press release. But demand for ARMs remains far below the levels prior to the Great Recession. The most recent Mortgage Bankers Association application activity survey reported a 9.7% ARM share.

This was down from 10.3% the prior week and 10.8% for the week of May 6. But at the end of 2021, the ARM share was 3.3%.

And for this same week in 2005, over 40% of applications were for ARM loans.

These new jumbos are available for first or second homes, and can be used for purchase, cash-out refinancing and rate-and-term refis.

The initial adjustment limit is 5%, with subsequent 1% and lifetime 5% caps.