Banks loosen their standards for jumbo loans

NEW YORK – Aug. 7, 2015 – As lenders compete to capture more of the high-end housing market, J.P. Morgan Chase announced that it’s loosening its underwriting standards for issuing jumbo mortgages – those loans that exceed $417,000 in most parts of the country and $625,500 in pricier areas.

The bank says it’s lowering its minimum credit score and downpayment requirements for mortgages up to $3 million. Chase’s jumbo mortgage decision follows similar steps from Bank of America Corp., Wells Fargo and other banks.

As a result, the jumbo market is getting bigger. Jumbo originations in the second quarter climbed to an eight-year high of $93 billion – a 58 percent increase year-to-year, according to Inside Mortgage Finance estimates. Jumbo mortgages issued by lenders last year accounted for about 20 percent of all first-lien mortgages, up from 5.5 percent in 2009.

“There’s no question that the jumbo market has probably recovered more than any sector of the mortgage market since the housing crisis,” says Guy Cecala, publisher of Inside Mortgage Finance.

J.P. Morgan plans to lower its minimum FICO credit scores for jumbo mortgages from 740 to 680 for loans on primary single-family purchases, second homes and some refinances. The bank is also allowing a 15 percent downpayment for loans up to $3 million – less than other banks such as Bank of America and PNC Financial Services Group Inc., which allow a 15 percent downpayment for jumbo loans up to $1 million and $1.5 million, respectively.

The housing recovery has been strong in the higher-priced tier. Existing single-family home sales priced between $750,000 and $1 million rose 21 percent in June from a year prior, according to the National Association of Realtors®. Meanwhile, sales of homes priced between $100,000 and $250,000 rose 12.5 percent. Homes priced lower saw sales fall 3 percent.

Source: “J.P. Morgan Loosens Terms for Jumbo Mortgages,” The Wall Street Journal (Aug. 4, 2015)

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