Banks Just Love Their Jumbos

If you’re wondering why there haven’t been more jumbo MBS deals this year just look at the math. Wells Fargo, for instance, has an average cost of funds of 50 basis points. The jumbo loans it’s originating (and putting on its balance sheet) are yielding north of 4%. That’s a sweet spread. Yes, we’re quite aware of Credit Suisse’s two recent jumbo MBS deals, but when you consider the source of these loans – MetLife Bank – you can surmise that these bonds would never have come to market if MetLife wasn’t liquidating its bank. CS bought whole loan jumbos from MetLife Bank which account for most of the collateral in its two deals. Take MetLife out of the equation and you have nothing. In short, banks and thrifts are not selling large chunks of jumbos – to anyone. It’s a ‘one-at-a-time’ flow market for sure.