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Comment by yardie | Hacker News Reader

If I understand the article correctly these mortgage lenders are financing sub-prime and non-conformal loans. Basically the loans so risky Fannie Mae don't want them. This also includes jumbo loans, the are non-conforming.

If you have the typical FHA, VA, conventional mortgage not much has changed for you.

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Conventional mortgages didn't change in 2007 either.

Now I don't think we're about to see the black swan again. But its always the riskier-end of the market that reacts first. I think its important to keep an eye on the subprime / risky mortgages to get a feel on the market.

The current question is "demand destruction", from a combination of inflation and rising interest rates. If the real economy out there is truly getting worse, then these little issues will become more and more common.

These lenders are not going broke because the mortgages are bad. They're going broke because they relied on short-term credit lines to originate mortgages, and rates have moved hard against them. Now they don't have the ability to rectify the situation without realizing a big loss on the mortgages.

The same consequences that a homeowner who over-buys has to face... I can't feel much sympathy for it.

Conventional mortgages didn't change but the assets associated with them did take huge valuation hit when the bubble popped, which still matters for those packaging up loans, if the assets they have a claim to have dropped 40%.

in general, you shouldn't really be affected much by this as a borrower, provided you don't have a problem meeting the payments. there'll be some communication regarding the change in who's charging you, and it'll be harder to get someone on the phone to talk to about anything, but in principle you don't need to worry if that happens to your lender.

Jumbo loans doesn’t mean risky.

Jumbo loans are inherently risky due to their size. Fannie Mae doesn't support them and only in very limited cases; homes in LA, SF, NYC.

Since the banks can't use those federal services (Fannie Mae) they have to carry that risk.

Relative risk may be higher because of the Fanny Mae requirements, but there are other variables including loan to value ratios that can adjust accordingly

This is overly simplistic.

> Fannie Mae doesn't support them and only in very limited cases; homes in LA, SF, NYC.

Here's the loan limit map for 2022: https://www.fhfa.gov/DataTools/Tools/Pages/Conforming-Loan-L... It's more than just three cities, including all of northern Virginia, and there's gradations.

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