Technology Credit Union has increased its lending limits on super jumbo loans up to $8 million on ARMs and $3 million on fixed-rate mortgages.
The previous cap was $3 million on any type of mortgage. In addition, the $1.7-billion CU raised the limit for home equity lines of credit to $1 million, up from $750,000.
Steven Donahue, VP-mortgage origination, told Credit Union Journal the numbers simply reflect the reality of an improving real estate market in the San Francisco Bay Area.
"The Silicon Valley was the last area to go into recession, and we are one of the first to get out. Many of the big technology companies are hiring. The economy has turned here and we are seeing it in mortgage originations. Last year we had a record year and we are starting 2013 with good numbers."
In 2012 Tech CU funded $219-million in residential firsts. Its previous high was set in 2009 with $206 million. Donahue said it also is seeing good numbers in commercial mortgages and multifamily mortgages.
In January 2013 Tech CU funded nearly $17 million in mortgages, which Donahue characterized as "very good" considering Thanksgiving to Valentine's Day is the slowest time of the year for the mortgage industry.
"Houses are flying off the market fast," he said. "Turnaround time has increased significantly. In December the average house was listed for just 32 days, compared to four to six months in previous years. Sellers are starting to see multiple offers again. Some houses are even selling before they are listed."
Because of the unique nature of Bay Area real estate, an $8 million mortgage is not seen as terribly unusual. In fact, Donahue said Tech CU is not making any changes to its underwriting procedures.
"We look at each loan on a case-by-case basis," he said. "Of course we look at tax returns and so forth, but these new limits reflect the nature of the market in our area. We want to have the products and services our members need, whether it is an $80,000 loan or an $8 million loan."
Tech CU has had a handful of inquires, but after three weeks of the new limits it had not yet booked any super jumbo mortgages.
According to Donahue, TCU has minimized the interest rate risk by only expanding the limit on ARMs. He said it is doing a number of purchase transactions in the $700,000 to $1-million range, with almost all of those being adjustable-rate loans.
"Our 5/1 jumbo is 2.875%, compared to 30-year fixed 4.75%, so on a $900,000 loan there is a big cost savings."
Tech CU is forecasting a strong 2013.
"There has been a lot written about rates going up, but property values being what they are I expect a better 2013 than 2012. People realize the time to buy is now," he said.
