What is the normal securitization channel for jumbo conventional loans?

The normal securitization channel for jumbo conventional loans is through private conduits. Jumbo loans are those that exceed the conforming loan limits set by government-sponsored enterprises such as Fannie Mae and Freddie Mac. Since these loans do not meet the criteria for securitization by these entities due to their size, they are typically pooled and securitized by private conduits.

Private conduits are specialized financial institutions that create mortgage-backed securities (MBS) from loans that do not conform to the standards of government-sponsored enterprises. They evaluate the credit risk associated with these larger loans and package them for investors, facilitating access to capital markets. This allows lenders to manage their balance sheets effectively by converting their loans into securities, which can be sold to investors looking for yield.

In contrast, government-sponsored enterprises focus on the conformity and affordability of loans, which does not include jumbo loans. Public markets in the context of this question would refer to securities that are issued and traded on public exchanges but are less likely to specialize in jumbo loans specifically. Insurance companies may invest in mortgage-backed securities as part of their portfolio, but they do not serve as the primary securitization channel for these types of loans.