JPMorgan Chase to raise mortgage borrowing standards

New York

JPMORGAN Chase & Co, the largest lender in the United States by assets, is raising borrowing standards this week for most new home loans, as the bank moves to mitigate lending risk stemming from the disruption caused by the coronavirus pandemic.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20 per cent of the home's value.

The change highlights how banks are quickly shifting gears to respond to the darkening US economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.

"Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers," said Amy Bonitatibus, the chief marketing officer for JPMorgan Chase's home lending business.

The bank was the fourth largest US mortgage lender in 2019, according to industry publication Inside Mortgage Finance.

The changes should help JPMorgan reduce its exposure to borrowers who unexpectedly lose their job, suffer a decline in wages, or whose homes lose value.

The bank said the change will also free up staff to handle a surge in mortgage refinance requests, which are taking longer to process due to staff working from home and non-essential businesses being closed.

Refinancing requests jumped to their highest level in more than a decade last month, as average rates on 30-year fixed-rate mortgages, the most popular home loan, fell to near record lows, according to data from the Mortgage Bankers Association (MBA).

JPMorgan would not disclose the current minimum requirements for its various mortgage products, but the average down payment across the housing market is around 10 per cent, according to the MBA.

The new credit standards do not apply to JPMorgan's roughly four million existing mortgage customers, or to low and moderate income borrowers who qualify for its "DreaMaker" product, which requires a minimum 3 per cent down payment and 620 credit score.

The US housing market had been on a steady footing earlier this year, but with a deepening recession and would-be home buyers unable to view properties or close purchases due to social distancing measures, the health crisis now threatens to derail the sector.

The residential mortgage market is already under strain after borrower requests to delay mortgage payments rose 1,900 per cent in the second half of March.

The National Association of Realtors last month said home sales could fall by around 10 per cent in the short-term, compared to historical sales for this time of year.

A US Federal Reserve March consumer survey said home prices were expected grow 1.32 per cent over the year, the lowest reading since the survey began in 2013. REUTERS