Whole loan portfolios of well underwritten Alt-A jumbo residential loans with full documentation deserve consideration in constructing a diversified income-oriented investment plan, said Ron D’Vari, CEO & Co-Founder of NewOak.

Due to strict capital rules and Dodd-Frank regulations most banks are not able to lend on such mortgages. 

As a result private capital sources and specialized real estate investment trusts are beginning to create such lending programs and are commanding much higher yields than regular conforming mortgages. 

“The rates on true Alt-A jumbo loans will typically be higher than that of a conforming loans due to the higher return requirements of non-bank end investors. Borrowers would need to carefully assess if a jumbo loan is right for them considering their specific financial facts, loan needs and down payment capabilities. Jumbo loan limits vary by zone and are influenced by the general housing conditions of the area in which the property is located,” D’Vari said.

Jumbo loans can range anywhere from $400,00 up to $3 million depending on location, borrower financial ability to pay and size of the down payment.

“True Alt-A jumbo mortgages can be used to construct portfolios of whole loans with stable cash flows and attractive coupon. Therefore income-oriented institutional investors should carefully consider well underwritten Alt-A jumbo mortgages as part of their asset allocation,” D’Vari concluded