As rising interest rates curb mortgage applications, particularly for refinance, and the housing market recovery continues its slow burn, banks and mortgage insurers are easing the tight credit restrictions put in place after the housing crisis in an attempt to drum up business, Bloomberg reports.
For example, JPMorgan Chase & Co. lowered down payment requirements in Florida, Nevada, Arizona and Michigan, which it no longer considers “distressed,” and Wells Fargo & Co. now offers nonconforming loans with loan-to-value ratios of 85 percent, up from 80 percent.
In Florida, JPMorgan reduced minimum down payment requirements on mortgages for primary residences from 10 percent to 5 percent and from 20 percent to 10 percent on second homes, a JPMorgan spokeswoman told Bloomberg.
“We have responded to improvements in the housing market by removing some additional requirements we put in place in hard-hit markets during the crisis,” the spokeswoman said.
Bloomberg reported that credit scores associated with closed loans are dropping as well. In July, the average FICO score on closed loans dropped to a two-year low of 737, according to Ellie Mae.