“I’d say the guidelines as a whole have gone to the extreme side and so loosening some of them isn’t a bad thing so long as it makes sense,” Stephen Mix, a loan officer with Mortgage Network told Mortgage Professional America. “You’d still have to look at the other factors and determine why a client’s score is lower; you have to evaluate on a case-by-case basis.”
J.P. Morgan Chase announced earlier this week it has lowered the FICO and downpayment requirements for jumbo loans up to $3 million.
Buyers with a FICO of 680 can now purchase a home with as little as 15 percent down; former guidelines required a FICO of 740 with 20 percent down.
It’s a pre-emptive move ahead of a broader policy change that may raise the threshold for jumbo loans and reduce the need for these type of loans.
“We want to make sure homebuyers can easily understand the benefits of financing with Chase,” Steve Hemperly, head of mortgage loan originations said in a release.
Mortgage rules have tightened since the recession, and there is room for some loosening, according to the Urban Institute.
“Although credit was too lax during the housing bubble years, the pendulum has swung too far in the other direction … although small progress has been made, significant room remains to safely expand the credit box,” the institute argued in a report released last week. “The mortgage market could have taken twice the default risk it took in the first quarter of 2015 and still have remained well within the cautious standard of 2001–03.”
For his part, Mix agrees. And he believes other lenders will follow Chase’s lead.
“I’ve seen that in the industry: It’s slowly loosening its grip on guidelines.”
One major bank has loosened the requirements for jumbo loan qualification, but industry players believe common sense underwriting should still apply.