Real Estate
After LA Fires Destroyed Mansions, Banks Reckon With Jumbo Loans
- City National, First Republic among firms with most exposure
- High home prices leave lenders with jumbo mortgages on books
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In the affluent Los Angeles neighborhoods scorched by wildfires, jumbo mortgages on multimillion-dollar homes are commonplace, making the loans a potential pain point for the banks left holding them.
More than 72% of mortgage debt fell into the category of nonconforming — also known as jumbo loans — in the parts of Los Angeles devastated by the fires. That’s nearly five times the nationwide average, and almost triple California’s 26% rate, according to a Bloomberg News analysis of Consumer Financial Protection Bureau data. More than $11 billion of jumbo loans were issued in the affected areas and kept on bank books from 2018 through 2023.