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A Chase Bank branch in Boston's Downtown Crossing shopping district. Banker & Tradesman file photo
One of the country’s biggest banks and a major player in the Massachusetts mortgage market is dramatically increasing requirements for borrowers looking to buy or refinance a home in the face of the coronavirus pandemic.
Chase said in a statement it is “temporarily” requiring buyers come prepared with a 20 percent down payment and a credit score of 700 or greater.
The bank is also decreasing the maximum loan-to-value and debt-to-income ratio and increasing reserve requirements for its purchase mortgage customers. The move is intended to make sure consumers will “receive a loan they can sustain long term,” the company told Banker & Tradesman in a statement.
For customers seeking non-cash-out refinancing of existing Chase loans says it will honor its prior loan-to-value and FICO thresholds of 3 or 5 percent down depending on credit scores of at least 620 or 640, respectively.
The changes, however, don’t apply to its DreaMaker program, which provides loan products for low- and moderate-income borrowers.
Chase is not the first bank to tighten lending standards – a Mortgage Bankers Association survey released at the end of last week showed mortgage credit availability fell 16.1 percent nationwide in March, including a 36.9 percent drop in the availability of jumbo loans – but it is by far the largest bank to do so.
“Mortgage credit supply decreased 16 percent in March to the lowest level since June 2015, with declines in availability across all loan types. There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,” MBA Associate Vice President of Economic and Industry Forecasting Joel Kan said in a statement accompanying the survey. “This month’s release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity. Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.”
