Financial services giant JPMorgan Chase is the latest bank to tighten its residential mortgage lending standards, a move to lessen its risk exposure as the economy crashes.
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Beginning Tuesday, Chase will require a credit score of more than 700 to grant a customer a new mortgage, CNBC reports. The bank will also demand a 20% down payment from borrowers in most cases.
Twenty percent down is traditionally associated with mortgages, but it hasn't been an industry standard for years. The median down payment for first-time buyers was 7% in 2018, according to a survey by the National Association of Realtors. For repeat buyers, the median was 16%.
FHA loans still require a minimum 3.5% down, and can be originated for buyers with lower minimum credit scores than conventional loans.
The recent turmoil in the mortgage market has been swift and dramatic, paralleling the speed with which Americans are losing their jobs. The total number of mortgages in forbearance expanded from 2.73% to 3.74% during a single week: March 30 to April 5. Only 0.25% of all loans were in forbearance during the week of March 2.
Chase isn't alone in tightening its mortgage standards in the face of pandemic-inspired economic dislocation. Nationwide, mortgage credit availability decreased in March, according to the Mortgage Credit Availability Index published by the Mortgage Bankers Association.
The index dropped by 16.1% in March, according to the MBA, coming in at 152.1. The index was benchmarked at 100 in 2012, and a drop means that lending standards are tightening, while an increase means they are loosening.
The supply of mortgage credit is down to its lowest level since June 2015, with declines in availability across all loan types, the organization reported. As with Chase, lenders across the board are demanding higher credit scores, along with higher down payments.
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