by Wolf Richter
Expensive markets face a new reality: lenders get skittish about jumbo loans.
It has been a sea change in no time. Banks and nonbanks – the “shadow banks” – are reducing mortgage lending and tightening up lending standards. Nonbanks, which include the largest mortgage lenders, are asking for a bailout because, as mortgage servicers, they’re facing a liquidity crisis. Home sellers are pulling their properties off the market because there are no buyers. The brokerage industry and the businesses that support it are reeling. In expensive housing markets, jumbo loans dominate, and they’re not backed by government guarantees and bailout programs. And the weekly data on mortgage applications shows where this is going.