With the First Republic Bank’s seizure this week by the Federal Deposit Insurance Corporation and its sale to JP Morgan Chase, mortgage brokers, and luxury residential agents are looking at a new landscape for jumbo home loans in the L.A. market.
In general, top-end buyers liked the low interest payments and small-bank feel offered by the now defunct lending institution, which was based in San Francisco.
Mark Cohen of Beverly Hills-based Cohen Financial Group has told clients that going forward they are not going to see the rock-bottom rates First Republic offered. The bank offered between 0.75 to 1 percent lower than other lenders.
“There are other banks to pick up the gap,” Cohen said. “You have to accept that borrowers will be paying prevailing market rates, which are approximately 5.5 percent on jumbo mortgages.”
In 2021, Jason Oppenheim, president of The Oppenheim Group, took a loan from First Republic to finance the purchase of his Newport Beach home, which serves as one of the locations on Netflix’s “Selling the OC” television program.
“It was the only time I enjoyed an easy underwriting process,” Oppenheim said of the two weeks it took to get the loan from First Republic. “Now it’s back to the brutal bureaucracy fighting through the underwriting process.”
Like Cohen, Oppenheim did not forecast a big change in the luxury residential market.
Oppenheim said that he felt more frustration than any other emotion when First Republic failed. “Banks, along with all businesses, should live or die based on their core business model, not because of a run on liquidity,” he said.
Sally Forster Jones who works with Compass noted that she will take a wait-and-see approach.
“There will definitely be an effect,” she said of First Republic’s demise.”They have long been a key player in the market, particularly for so many of our residential buyers and developers. There’s going to be a niche that will be a challenge to fill.”
However, Forster Jones has not seen much suffering in the marketplace yet. “Right now, there is a lot of demand. There’s also not a lot of inventory, so prices remain strong. We’re still receiving multiple offers on many properties.
“Yet all obstacles aside, the current situation is nowhere as challenging as 2008,” she said of working through the Great Recession.