These are typically 4 times the maximum loan amount set by Fannie Mae or Freddie Mac which as of 2024[update] was $766,551.
The underlying lack of liquidity for Super Jumbo Mortgage securities is compounded by a reduction in lending capacity for the institutions which must service these larger loans; as they lack a ready market for secondary sale the loans remain "on the books" of the lender, tying up capital in servicing that would otherwise be invested again.
The assets against which super jumbo mortgages are secured are primarily classified as "luxury" residential real estate, a segment which is highly prone to market volatility in gross dollar terms.
Typical Super Jumbo mortgage LTV maximums range from 80% to as low as 50% depending on loan amount and credit scoring.
Cash out refinancing is a very popular use of Super Jumbo mortgages, as it allows individuals to "take profits" from appreciated real estate with minimal tax consequences.
This is a significant concern for the lender as the asset in which they are taking a security interest must have a reasonable value to justify their risk and associated premiums.
The popularity in particular of cash flow option ARM loans with super jumbo mortgage applicants is due in large part to the difference in perception of negative amortization in the context of their primary residence not being an asset but a liability.
When home equity is substantial as required by the more stringent LTV requirements of super jumbo mortgage underwriting, negative amortization allows a borrower to extract more of the cash locked in the home's equity than would otherwise be possible, short of selling the property, due to the ability to defer interest above and beyond the Loan To Value stipulated on the note.
Another popular application for the use of negative amortization loans by super jumbo mortgage borrowers is to shift as much of their taxable income to long term capital gains as possible by taking advantage of the lower monthly carrying costs and the ability to make lump sum payments at annual or semi-annual intervals.
Recent events constraining liquidity, securitization, and demand in the capital markets for structured debt securities have severely impacted the ability of conventional lenders to make loans larger than the Fannie Mae conforming loan limit ($417,000 for a single family residence in most states).