Beginning Tuesday, JP Morgan Chase will require new mortgage borrowers to have at least a 700 credit score and be required to put down an initial deposit of 20 percent of the purchase value, according to an exclusive report in Reuters.
The decision to raise standards comes at a time when the housing market is rapidly slowing down in markets across the country and is aimed at mitigating the economic uncertainty and risk associated with the spread of COVID-19.
“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.
Low and moderate-income consumers who use the company’s DreaMaker loan program won’t be required to meet the new standards.
Lenders across the country are enacting stricter standards, according to the Mortgage Bankers Association (MBA). Last week, the trade association released its Mortgage Credit Availability Index, which showed declines of 16.1 percent month-over-month in March to 152.1 — the lowest level since June 2015.
“There was a reduction in the availability of loans with lower credit scores and higher [loan-to-value] ratios, and the largest pullback came from the jumbo and non-qualified mortgage space,” Joel Kan, vice president of economic and industry forecasting at MBA said in a statement.
In addition to reducing the availability of loans for lower credit individuals, some companies like Wells Fargo are suspending its correspondent channel from purchasing non-conforming, loans from correspondent sellers — loans that exceeded established limits to be backed by a federal government agency.
There’s also been some public fear expressed over the havoc the Trump administration’s stimulus package could have on the mortgage industry. The CARES Act includes forbearance for a period for borrowers with government-backed mortgages.
JPMorgan Chase is currently providing a 90-day grace period for mortgage and auto loan/lease payments, along with waiving any associated late fees.