JPMorgan Chase is tightening its mortgage lending standards just as the federal government has been pumping massive amounts of money into the crippled economy to create liquidity.
Borrowers now need a credit score of at least 700 and a 20 percent down payment if they want a home loan from the bank, according to Reuters. JPMorgan Chase is the fourth largest mortgage lender in the country.
Amy Bonitatibus, chief marketing officer for JPMorgan’s home lending service, called it a “temporary” change that would allow the bank to focus on existing customers. The bank also said it would free up employees to handle the wave of refinancing requests that have come in since mortgage rates dropped to near record lows last month.
Most home mortgage lenders require a 10 percent down payment, although 20 percent down was for years the industry standard. Home prices have surged over the last decade and previous surveys show young homebuyers were not able to put down 20 percent.
JPMorgan’s latest move is another blow to the U.S. government’s recent efforts to keep the economy moving and avoid a prolonged recession after the coronavirus pandemic subsides.
Home sales have already plummeted in many parts of the country that remain under stay-at-home orders. Last month, the National Association of Realtors said that sales could be 10 percent lower than usual this time of year. Borrower requests to delay mortgage payments skyrocketed 1,900 percent last month, according to Reuters.
Loan applications for home purchases have also fallen to the lowest levels since 2015, according to a recent report, which cited the Mortgage Bankers Association’s purchase index. And the four-week drop in the index was the steepest since 2010, in the aftermath of the Great Recession.