Banks are handing out mortgages of as much as $10 million to the wealthy in record numbers while first-time homebuyers struggle to get loans.

Erin Gorman, managing director at Bank of New York Mellon Corp., said she's fielding more requests for home loans of at least $2 million than ever before. She recently provided a mortgage of more than $6 million for a client's purchase of a second property in Colorado.

“These high-net-worth borrowers do act differently than first-time buyers, who borrow because they have to,” said Gorman, who serves as the national mortgage sales director at Bank of New York Mellon's wealth management group based in Boston. “High-net-worth borrowers don't have to borrow. They choose to, so they're very strategic about what, why, and when they borrow.”

Americans from San Francisco to Boston are taking out a record number of mortgages in excess of $1 million while stiff lending standards crimp total loan volume. They are borrowing while mortgage rates are still low rather than liquidate their investments amid a stock market gain of 7 percent this year.

The number of loans from $1 million to $10 million to buy single-family homes in the 100 largest metropolitan areas surged to more than 15,000 in the second quarter, the highest ever, according to property data firm CoreLogic.

At the same time, banks are restricting home loans to first-time buyers who don't have high credit scores. In June, about 28 percent of total existing-home sales involved new buyers compared with an average of 35 percent since October 2008, according to the National Association of Realtors.

Luxury Homes

Jumbos, or loans of at least $417,000 in most areas, exceed the limit for government-controlled Fannie Mae and Freddie Mac to guarantee. The mortgages are made to the most creditworthy borrowers and are generally held by banks instead of being packaged into securities and sold to investors.

In Southern California, millionaires are boosting demand for the largest loans because of an improving economy and brisk sales of luxury homes gives them confidence in the market, said Mark Cohen, a mortgage broker at lender Cohen Financial Group in Beverly Hills. Cohen, whose average loan has increased to $1 million from $800,000 this year, said he gave a $9.9 million mortgage recently to an executive at a publicly traded company in Brentwood, a neighborhood in Los Angeles where former California Governor Arnold Schwarzenegger has lived.

Sales of homes costing at least $2 million in 30 of the biggest metropolitan areas during the first half of this year rose to the highest since at least 2006, according to CoreLogic. Sales of existing homes of $1 million and more increased 8.5 percent in June compared with a year ago, the biggest jump among all price ranges, data from the National Association of Realtors show.

Low Rates

Some borrowers are reluctant to sell part of their portfolios to pay cash for a home as the stock market reaches new highs, said Jim Francis, head of consumer lending at MUFG Union Bank, N.A., a subsidiary of Mitsubishi UFJ Financial Group Inc. Many of the bank's clients are business owners who would rather put money into their firms instead of using it to pay for a house, he said.

Union Bank originated more than 350 loans of at least $2 million this year, said Francis. Its average loan size is about $900,000.

Interest rates are also driving demand, with borrowers getting mortgages at less than 3.5 percent and expecting rates to rise in coming months. Some customers are opting for the seven-year adjustable-rate mortgage, which as of yesterday was offered at 3.15 percent, over the five-year loan, said BNY Mellon's Gorman.

Read more: Million-Dollar U.S. Housing Loans Surge to Record Level