“No Bid”? First Magnus suspends locking of jumbo mortgage products

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First Magnus sent an email to brokers from its lock desk saying that jumbo loans were currently ineligible to lock or register with the company.

Until further notice the programs listed below are unavailable for lock.

JL3 JIL3
JL5 JIL5
JL7 JIL7
JL10 JIL10

EFFECTIVE 3:00 PM ARIZONA TIME TUESDAY, AUGUST 2, 2007

Those correspond to the Jumbo LIBOR ARM product types – 3, 5, 7, 10 year ARM products.

This is pure speculation on my part but this would most likely be caused by the inability of First Magnus to get a bid on its jumbo mortgage products on the secondary market.Â We’ve heard that the secondary market is broken from IndyMac’s CEO and this is probably a symptom of that.

If you need to preserve liquidity you keep from writing large loans on thin pricing margins so they don’t clog up your lines of credit.Â If you get your lines clogged up with low yielding loans on pricing that isn’t in line with the secondary market expectations you run in to a major cash crunch quickly.

Probably a good move on First Magnus’ part until they can reprice the jumbo loans to more properly match the market risk and appetite (or lack thereof.)