THE BASIS POINT

Lehman Getting Back Into Jumbo Mortgages?

Lehman’s Aurora unit was well known for originating Alt-A jumbo mortgages—Alt-A was for lesser credit quality, lower down payments and limited income documentation borrowers. When credit markets seized, Aurora got in trouble and Lehman collapsed. Now as Lehman is engaged in asset sale activities, the Aurora unit could be gearing back up. They’ve got a strong servicing business, and now they may also begin lending again according to a Bloomberg report. This is a good sign of life in the Jumbo mortgage market since:

Lehman was the largest underwriter in 2007 of so-called non-agency home-loan securities, selling $67.6 billion of the debt, or 9.6 percent of the total, according to newsletter Inside MBS & ABS. The firm ranked as the second-largest issuer, creating $49.5 billion of the bonds.

The reason Jumbo mortgages are still so limited is because there is no secondary market for these. So either lenders keep these jumbo loans on their books, or they don’t do them. Because there’s no source to pool those mortgages and sell them to. But this could be an early sign that will change soon.