JPMorgan Chase & Co. says it is loosening its lending standards by lowering some down payment requirements in Florida, Nevada, Arizona and Michigan and also by relaxing underwriting requirements for the Federal Housing Administration's (FHA) recently streamlined refinancing program.
With property values rising – and delinquencies and foreclosures dropping precipitously – the bank has declared that it will no longer consider the aforementioned states ‘distressed,’ according to a Bloomberg News report.
Other banks have loosened their lending standards in recent months as well, due primarily to a decline in mortgage application volume. In addition, some banks may be loosening lending in order to capitalize on current, short-term market conditions ahead of the January implementation of the Consumer Financial Protection Bureau's new ability-to-repay and qualified mortgage rules, which impose stricter lending standards for mortgages.Â
According to a Federal Reserve survey of senior loan officers, more than 10% of banks loosened standards on prime or low-risk residential loans in July.
That compares to Ellie Mae's Origination Insight Report, also showing that banks and other lending institutions relaxed their lending standards that month. The average FICO score fell to 737 from 742 in June, according to the loan technology provider.
Purchase loans represented 53% of the market – the largest percentage since Ellie Mae began tracking the data in August 2011 – while refinancings represented 47%.
According to the Bloomberg News report, Wells Fargo in July started offering nonconforming loans requiring a 15% minimum down payment, whereas previously, these loans required a 20% down payment.
JPMorgan also recently loosened its lending standards. In May, it removed a minimum credit score requirement of 640 for the FHA's streamlined refinancing program, according to the report.