Salient to Investors:

Banks are offering jumbo mortgages – too big for government programs – at rates at or below taxpayer-backed loans, while the extra cost of 30-yr fixed jumbo loans averaged a 6-year low of 0.16 percent in June.

Paul Miller at FBR Capital Markets said bigger loans are becoming relatively cheaper because they are mostly put on bank balance sheets instead of packaged into securities that get sold to investors. Miller said banks are seeking those loans because there is insufficient economic growth to create the lending opportunities needed to support their capital.

FDIC says the difference between deposits at banks and their lending is at a record $3.2 trillion versus the average of $430 billion in the decade before the 2008 financial crisis. Credit Suisse says the ratio of loans to deposits for the big 8 commercial banks was at a 5-year low of 84 percent at the end of 2012, down from 101 percent in 2007.

Wells Fargo is offering 30-yr fixed jumbo loans at lower than the rate for conforming loans. Ditto JPMorgan.

Keith Gumbinger at said it is unusual to see jumbos priced below the conforming rate – competition for this small group of very valuable customers can be intense.

Anthony B. Sanders at George Mason University said wealthy borrowers are good candidates for adjustable-rate mortgages, which banks prefer because they share the risk of rising rates with the homeowners.

Zillow said the median sale price of properties between $1 million and $5 million rose 13 percent in April from a year earlier, versus the 5.1 percent increase for all homes.

Mark Zandi at Moody’s Analytics said tighter underwriting means new jumbo loans have been performing beautifully.

David Hilder at Drexel Hamilton said the banks are awash in liquidity.

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