2016-06-02wsj.com

The biggest U.S. banks are tilting toward these high-dollar mortgages as they overhaul loan operations. And jumbo loans, which were less important during the subprime-loan boom, are helping banks take on less risk, as mandated by regulators in the postcrisis era.

These loans, however, could put banks at odds with another federal regulatory mandate--one that says lenders should serve a racially diverse set of customers. As they approve relatively more jumbos, major banks are granting fewer mortgages to African-Americans and Hispanics than just before the crisis, a Wall Street Journal analysis found.

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Jumbos, loans above $417,000 in most markets, are attractive because they typically feature high credit scores, big down payments and low default rates. And they aren't linked to the government programs that cost banks tens of billions of dollars in fines related to the subprime-loan debacle.

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Just as the subprime customer was the ideal borrower for some banks before the crisis, the jumbo borrower is most appealing for many banks now. While the jumbo uptick isn't solely responsible for lending declines to some minorities, these loans epitomize the direction banks are turning their mortgage operations--toward safer, more-affluent customers who tend to be white or Asian.

The WSJ found that between 2007 and 2014 the proportion of all loans that went to Asian and White borrowers went from 70% to 75% of the total; the proportion going to Hispanic and Black borrowers fell by exactly the same 5% -- from a bit under 19% to about 12.5%.



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