JP Morgan Chase & Co. said the ability to fund jumbo loans helped its consumer banking division originate $39.2 billion in mortgages during the third quarter, a 35 percent increase from a year ago.
Many lenders who originate loans for sale in the secondary market have had to scale back production of jumbo loans, which exceed the $417,000 conforming loan limit. Many secondary market investors are staying away from loans not eligible for repurchase or guarantee by Fannie Mae and Freddie Mac, or demanding higher returns.
In a press release, Chase said it’s been able to continue funding jumbo loans because it can tap into JP Morgan Chase’s $1.5 trillion in assets and $120 billion in stockholder equity.
The company said it has increased its mortgage sales force to more than 5,000 workers, boosting its market share of mortgages and home equity loans to 9 percent during the third quarter, compared with 5.7 percent a year ago, citing figures from Inside Mortgage Finance.
Chase said it boosted market share even as it tightened credit standards, making adjustments to acknowledge declining home values in certain markets and reducing the use of high loan-to-value ratios and stated-income products.
The bank is also employing underwriting guidelines that require borrowers to demonstrate they can handle increases in interest rates on nontraditional mortgages, and requiring an initial fixed rate for at least five years on adjustable-rate mortgages for nonprime borrowers to reduce payment shock risk.
The bank said it’s introduced new methods to educate borrowers, including upfront disclosures comparing features of traditional and nontraditional mortgages. Borrowers who complete a mortgage counseling class through an approved nonprofit counseling organization are given discounts on mortgage insurance premiums.