JPM relaxing jumbo loans lending standards

[Coronita]

Here it comes….

http://finance.yahoo.com/news/j-p-morgan-loosens-terms-235900445.html

….

J.P. Morgan Chase & Co. is loosening its underwriting criteria for big mortgages, as lenders ramp up competition to grab a bigger share of the high-end housing market.

The nation’s largest bank by assets plans to announce Wednesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.

For jumbo mortgages, J.P. Morgan plans to lower the minimum FICO credit scores it requires to 680 from 740 for loans on primary single-family purchases, second homes and certain refinances on those properties.

The moves by J.P. Morgan are in some ways more aggressive than those of its peers. The bank is allowing a 15% down payment for loans up to $3 million, compared with Bank of America and PNC Financial Services Group Inc., which permit a 15% down payment for jumbo loans of up to $1 million and $1.5 million, respectively…..

(…If interest rates rise and makes it harder for people to qualify, we’ll just lower the bar for those that can qualify…..)

Party on!

[all]

I was looking at the Home Valuation Index the other day and it looks like we are where we were around 2003, when a few people thought the houses are peaking and when the free money party was starting.

[The-Shoveler]

Yea but you really can’t get the party started until you get rid of the pesky down payment requirement.

That and this whole being able to qualify thing.

They really kind of put a downer on the whole party, esp the lower end, the party is just not being primed (you know juiced) like it was in 2005/6.

[spdrun]

^^ Exactly.

Fortunately, jumbo loans for primaries still fall under QM. As long as QM remains in force, the kind of unqualified/stupid people who bought overvalued houses in the mid-00s will be out of the market. Because good luck meeting DTI.

[flyer]

.

[flyer]

+1. Glad we have some regs in place that help prevent a repeat of handing property to completely unqualified individuals again.

That’s not to say there will never be problems or corrections again, or that lowering credit scores won’t cause issues, but these few safeguards should help to some degree.

[joec]

I think having any down payment requirement will make the market much different than no down, ninja loans of the 2005-2007 period.

For most folks, saving 100k+ is not easy so they are less likely to gamble when they had no “skin” in the game previously.

[urbanrealtor]

Don’t buy the OP’s premise.
Agree with some of the other commenters about this being like the pre-bubble era where we should see something closer to the “soft landing” predicted in 2004.

Easy way to fix this:
The benefit of hindsight is that the the mission of the GSE’s is more clear and risk easier to manage.
Now that we have seen the private secondary market collapse, it is much easier to argue that they DON’T need to compete with private MBS investors.

[gzz]

I don’t see this as unreasonable or a sign of a bubble. Middle class people can get down payments of with 3% FHA loans and 5% with conforming loans. What’s wrong with the lower rich putting down 15% instead of 20%?

In fact, these are likely lower risk loans than the FHA 3% down loans. Foreclosure costs as a percentage of the loan will be much lower for high-end properties in the event of default. And when the market turned down last time, the 1-3 million range suffered the least. Small condos in City Heights? down 60%. Single families in La Jolla? Maybe 30%.

Another thing is that with rising prices, more and more homes now require jumbo mortgages. Without this sort of policy, standards would automatically get tighter each year. The extended conforming loan limit seems to go up much less each year than actual prices. Chase didn’t become the largest bank in the USA by being stupid, like, say WaMu.

[spdrun]

Standards should become tighter as prices go up — natural bubble control.

Fortunately, most FHA/Fannie people can’t even get 3-5% down due to debt-to-income requirements. This is a GOOD thing! No need to give unqualified numpties free money — if you don’t have a good down payment, you’re not cut out to own a home.

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