107.9FM NYJ/LA

Translate This Page

JPMorgan Removes Lending Barriers in Booming U.S. Markets

Posted by By Prashant Gopal, Heather Perlberg & Dakin Campbell - on Wednesday, September 11, 2013 Under: 848FINACE

Robert Caplin/Bloomberg
As the economy rebounds and home values climb at about the fastest pace since 2006, lenders including the largest, Wells Fargo & Co., JPMorgan, Bank of America Corp., and mortgage insurers are easing the tightest credit conditions in two decades, lifting restrictions put in place after the worst real estate bust since the Great Depression.


TJPMorgan Chase & Co. (JPM), the nation’s largest bank by assets, is easing mortgage lending standards in housing markets hard hit by the crash where prices are surging.

he bank lowered some down payment requirements in Florida, Nevada, Arizona and Michigan because they will “no longer be considered distressed states,” it informed smaller lenders it buys loans from in July. The second-largest U.S. mortgage lender also loosened underwriting requirements for a refinancing program for Federal Housing Administration borrowers.

As the economy rebounds and home values climb at about the fastest pace since 2006, lenders including the largest, Wells Fargo & Co. (WFC), JPMorgan, Bank of America Corp. (BAC), and mortgage insurers are easing the tightest credit conditions in two decades, lifting restrictions put in place after the worst real estate bust since the Great Depression. Banks are being forced to compete harder for customers after a spike in borrowing costs from near-record lows slowed refinancing by 60 percent and curbed what had been record profits.

“Historically, you make underwriting as tough as possible when people are lined up at the door and when the lines go away, you start loosening underwriting to get people back,” said Guy Cecala, publisher of Inside Mortgage Finance.

Fed Survey

More than 10 percent of banks reported they loosened standards on “prime” or low-risk residential loans in recent months, according to the Federal Reserve’s July survey of senior loan officers. The average FICO score for closed loans fell to 737 in July, the lowest level since at least August 2011, according to data compiled by Pleasanton, California-based Ellie Mae. Borrowers loan-to-value and debt-to-income ratios also increased from May, signaling lenders are willing to accept more risk to maintain volume.

Wells Fargo (WAC), which originated about 1 in 4 U.S. home loans in the first half of the year, has relaxed certain credit standards and is requiring borrowers to put up less equity to buy high-priced homes.

The San Francisco-based bank began, on July 13, to offer nonconforming loans with a loan-to-value ratio of 85 percent, up from 80 percent, according to Tom Goyda, a bank spokesman. That means borrowers have to come up with less equity to get financing. The terms on the loans, which are too large for purchase by Fannie Mae (FNMA) and Freddie Mac, apply for new home purchases and refinancing, and don’t require mortgage insurance, Goyda said in an e-mail.


Fed Survey

More than 10 percent of banks reported they loosened standards on “prime” or low-risk residential loans in recent months, according to the Federal Reserve’s July survey of senior loan officers. The average FICO score for closed loans fell to 737 in July, the lowest level since at least August 2011, according to data compiled by Pleasanton, California-based Ellie Mae. Borrowers loan-to-value and debt-to-income ratios also increased from May, signaling lenders are willing to accept more risk to maintain volume.

Wells Fargo (WAC), which originated about 1 in 4 U.S. home loans in the first half of the year, has relaxed certain credit standards and is requiring borrowers to put up less equity to buy high-priced homes.

The San Francisco-based bank began, on July 13, to offer nonconforming loans with a loan-to-value ratio of 85 percent, up from 80 percent, according to Tom Goyda, a bank spokesman. That means borrowers have to come up with less equity to get financing. The terms on the loans, which are too large for purchase by Fannie Mae (FNMA) and Freddie Mac, apply for new home purchases and refinancing, and don’t require mortgage insurance, Goyda said in an e-mail.

‘Total Picture’

“Getting approved for a home loan hinges on a borrower’s total financial picture,” Goyda said in an e-mailed statement. “We are always evaluating our credit standards in light of market conditions and trends.”

Goyda declined to provide further details on where Wells Fargo has eased underwriting restrictions.

JPMorgan removed a minimum 640 credit score requirement for the FHA’s streamlined refinancing program in May, enabling more borrowers to get new home loans at lower interest rates, according to spokeswoman Amy Bonitatibus.

Banks are trying to lure more borrowers after refinancing applications dropped to a two-year low. The industry benefitted from record profit margins last year, when refinancing accounted for 76 percent of last year’s $1.75 trillion in loan originations.

JPMorgan Chief Executive Officer Jamie Dimon told investors in July that rising interest rates could trigger a “dramatic reduction” in the bank’s mortgage profits after mortgage fees and related revenue at the bank dropped 20 percent to $1.82 billion in the second quarter, compared with $2.27 billion a year earlier.

Eliminating Jobs

An increase in lending for home purchases won’t be enough to replace a drop in refinancings, JPMorgan Chief Financial Officer Marianne Lake said in a presentation at an investor conference this week. The bank’s pretax-profit margins and income on mortgage lending will be “slightly negative” in the third and fourth quarters as the firm takes time to adjust its fixed costs. The firm is eliminating as many as 19,000 jobs in its mortgage and community-banking divisions through 2014 as Dimon trims expenses, JPMorgan said in February.

“We continuously review our lending standards to help families buy homes they can afford over the long term,” Bonitatibus said. “We have responded to improvements in the housing market by removing some additional requirements we put in place in hard-hit markets during the crisis.”

Bank of America has been easing underwriting standards in markets it designated as “soft” in certain parts of the country as the housing market improves, said Kris Yamamoto, a company spokeswoman.

Loosened Credit

Since Federal Reserve Chairman Ben S. Bernanke indicated the central bank may slow its purchases of government and mortgage bonds, the average rate on 30-year home loans has risen more than 1.2 percentage points after hitting a low of 3.35 percent in May, according to Freddie Mac data.

“Loosened mortgage credit would offset some of the impact of rising rates, which make homeownership more expensive,” said Jed Kolko, chief economist at San Francisco-based property-listings service Trulia Inc. “Because rates are rising, demand for refinancing has plummeted and some banks have suggested that would open up capacity for home-purchase lending.”

The U.S. homeownership rate fell to 65 percent this year, its lowest level since 1995, according to Census Bureau data, as fewer people were able to qualify for a mortgage. Banks are starting to ease credit with home prices across the country rising 12.1 percent in June from a year earlier, according to the S&P/Case-Shiller index of 20 cities.

Cash Buyers

Prices in some of the hardest-hit markets have rebounded faster. Las Vegas gained 24.9 percent, Phoenix showed a 19.8 percent increase, Detroit rose 16.4 percent Miami-area values were up 14.8 percent.

Private-equity firms such as Blackstone Group LP building rental businesses and other cash buyers have helped lift house prices in cities showing some of the biggest gains. Their mass purchases have made it more difficult for borrowers seeking mortgage financing, as they compete for a shrinking supply of properties.

In Florida, lenders including JPMorgan and mortgage insurers this year removed many of the additional requirements that had helped to push the share of cash buyers above 45 percent in the second quarter, said Rob Nunziata, co-Chief Executive Officer of FBC Mortgage LLC.

Florida Downpayments

JPMorgan decreased the minimum downpayment on mortgages made in Florida for primary residences to 5 percent from 10 percent and down to 10 percent from 20 percent for second homes, according to Bonitatibus.

“Those restrictions have handcuffed Florida buyers,” Nunziata said, also referring to mortgage insurers and banks. “When you had restrictions telling buyers they had to put down an extra 5 to 15 percent in some cases, that eliminated a lot of potential buyers from qualifying.”

Mortgage insurers that restricted coverage during the housing crisis, including MGIC Investment Corp. (MTG) and Genworth Financial Inc. (GNW), have eased underwriting guidelines this year as the market improves.

During the crash, borrowers in California, Florida, Nevada and Arizona needed a credit score of at least 700 and could have a maximum loan-to-value ratio of 90 percent to qualify for mortgage insurance with MGIC, said Sal Miosi, vice president of marketing at the Milwaukee-based firm.

Added Complexity

Last month, the third-largest U.S. mortgage insurer limited rules so borrowers whose loans qualify for purchase by Fannie Mae or Freddie Mac with credit scores of at least 620 and a loan-to-value ratio up to 97 percent can get insurance coverage, according to Miosi.

Additional restrictions “weren’t contributing to the credit quality, they were just adding to complexity,” he said.

Genworth Financial Inc., the fourth-largest mortgage insurer in the country, broadened credit guidelines in the first quarter of 2013 and reduced pricing, Rohit Gupta, chief executive officer of the company’s U.S. mortgage insurance business, said in an e-mailed statement.

Banks are still taking a cautious credit posture, according to David H. Stevens, CEO of the Mortgage Bankers Association.

“You’re starting from a very narrow market, so any expansion wouldn’t go near the reckless lending practices of the early 2000s,” he said. “We’re in the most conservative overall credit environment for housing finance that we’ve seen in almost three decades.”

Risky Lending

A decrease in access for interest-only loans and those with terms longer than 30 years led to a slide in a Mortgage Bankers Association measure of loan availability last month.

Those types of loans are less attractive to banks as planned rules created by the Consumer Financial Protection Bureau to curb abusive or risky lending kick in next year.

Credit has been loosening faster for the wealthiest Americans, since bigger loans are mostly put on bank balance sheets instead of packaged into securities that get sold to investors. Applications for jumbo mortgages of at least $729,000 increased 59 percent in the first four months from a year earlier. Loans of less than $150,000, fell by 2.1 percent, according to the MBA.

President Barack Obama’s administration has been pushing to expand homeownership opportunities as families rebuilding from the recession face some of the tightest underwriting standards. The president last month introduced new housing reforms targeted at middle-class communities.

Borrowers with foreclosures or bankruptcies resulting from a job or income loss can now finance a home purchase with an FHA mortgage as long as they demonstrate 12 months of timely payments, complete housing counseling and otherwise qualify. The FHA, a government mortgage insurer, previously required a three-year wait.

More than 7 million houses have been sold for a loss or lost to foreclosure since 2007, according to RealtyTrac.

“The reaction post-bust was a bit extreme but we’re returning to more prudent underwriting standards,” said Erin Lantz, director of mortgages at Seattle-based Zillow Inc.

To contact the reporters on this story: Heather Perlberg in New York at perlberg@bloomberg.net Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editors responsible for this story: Rob Urban at robprag@bloomberg.net;

In : 848FINACE 


Tags: jpmorgan removes lending barriers in booming u.s. markets 

Panerai Luminor "Blackseal" PAM76 Titanium Black & Silver dial 44mm Automatic wa

PANERAI WATCH
LUMINOR / Ref. PAM76
44mm, Titanium
W525050
Panerai Luminor "Blackseal" PAM76 Titanium Black & Silver dial 44mm Automatic watch
TRY IT ON
G&S Price: $22,000

SALE PRICE

$16,900 


    HOT 103.1 FM HOUSTON

    Fashion director finds. Everything our fashion office is obsessed with right now.

    Shop Janelles's finds


     
     
    E*TRADE from Morgan Stanley 
    View in browser   |   Log on
     
     
     
    Make the most of your cash in 2025
     
    Boost your earning power with a high-yield savings and bank certificate of deposit (CD) account.
    BANKING
     
    You’re already building your portfolio with E*TRADE from Morgan Stanley. Now, unlock more of your financial potential and open a high-yield bank account from Morgan Stanley Private Bank, Member FDIC, on etrade.com.
    Bank smarter with some of today’s best rates
    Bank CD accounts
    Bank CD accounts
     
    Plus, even more reasons to bank with us
    Award Icon
    Award-winning banking*
    Our accolades speak for themselves
     
     
    Check Icon
    Easy money management
    With E*TRADE from Morgan Stanley’s best-in-class digital experience6
     
     
     
    Lock Icon
    FDIC
    protected

    Up to applicable limits. Certain conditions must be satisfied.7
     
     
     
    Learn how to manage cash strategically
    Not sure which account is right for you? Learn how to use cash as an asset class to balance your short-tern needs with your long-term goals. Read article
     
     
    Facebook twitter Youtube
    Privacy Pledge  |  Security Center  |  FAQs
     
     
     
     
    *February 3, 2025. Buy Side from Wall Street Journal. Reprinted with permission by Dow Jones & Company, Inc.

    1. As of 2/21/2025, the Annual Percentage Yield (APY) of the Premium Savings Account offered by Morgan Stanley Private Bank, National Association is 4.00%. Your interest rate and APY may change at any time and fees may reduce earnings. Please visit etrade.com/ratesheet for information regarding this account's current interest rate and corresponding APY.

    2. Based on comparison to the National Deposits Savings Average Annual Percentage Yield (APY) as published on the FDIC Weekly National Rates and Rate Caps Weekly Update, as of January 21, 2025.

    3. Certificate of Deposit (CD) interest rates are fixed from the start of the term until their maturity date.

    CD offerings can change on a daily basis. The interest rate on the Settlement Date can be higher or lower than the interest rate that was available at the time of account opening. If your Settlement Date is within 10 calendar days of the account opening, the applied interest rate will be the highest of the prevailing interest rate on the date of account opening or the date of Settlement. Maturity is determined based on the Settlement Date and the term selected. The APY is based on no withdrawal of credited interest and no redemption prior to the stated maturity date. A withdrawal will reduce earnings. See the CD Rate Table page at etrade.com for information on term lengths, current interest rates and corresponding APYs.

    Interest is compounded daily. Interest will compound from the Settlement Date until the last full day before the date of withdrawal using the daily balance method. Accrued interest posts to your account on a quarterly basis, unless you select at account opening to receive interest via check.

    4. As of 2/21/2025, the Annual Percentage Yield (APY) of the Certificates of Deposit is up to 4.25%. Your interest rate and APY may change at any time until funding is settled, and penalties may reduce earnings. The APY is based on no withdrawal of credited interest and no redemption prior to the stated maturity date. Please visit etrade.com/ratesheet for information regarding the current interest rate, corresponding APY, and account terms.

    5. Bank CD accounts must be opened and funded to lock in a fixed rate.

    6. For the StockBrokers.com 2024 Annual Awards, all 17 U.S. equity brokers reviewed were assessed on over 200 different variables across eight areas: Commissions & Fees, Investment Options, Platforms & Tools, Research, Mobile Trading, Education, Ease of Use, and Overall. E*TRADE from Morgan Stanley was awarded the #1 Investor App, and #1 Web Trading Platform. In addition, E*TRADE received fifteen Best in Class distinctions: Overall Rating, Commissions & Fees, Research, Platforms & Tools, Investment Options, Mobile Trading Apps, Education, Bank Brokerage, Beginners, Futures Trading, IRA Accounts, Options Trading, Penny Stock Trading, High net Worth Investors, and Ease of Use. E*TRADE's star ratings for all category rankings out of 5: Overall (5.0 stars), Customer Service (4.0 stars), Commissions & Fees (4.5 stars), Research (5.0 stars), Platforms & Tools (4.5 stars), Mobile Trading Apps (5.0 stars), Investment Options (4.5 stars), Education (5.0 stars), Ease of Use (5.0 stars), Customer Service (4.0). Read the 2024 Online Broker Review.

    7. The Premium Savings Account gives Morgan Stanley Private Bank, National Association, Member FDIC the ability to send any amount held on deposit in your Premium Savings Account to other depository accounts at Federal Deposit Insurance Corporation (“FDIC”) member banks with the purpose of affording you additional FDIC insurance coverage. The Program is designed to offer up to $500,000 in FDIC coverage to individual accounts (up to $1 million for joint accounts). Certain conditions must be met. Learn more.

    Deposits held in Certificate of Deposit accounts are FDIC insured up to $250,000. Learn more.

    No minimum initial deposit is required to open a Premium Savings Account and Certificate of Deposit Account. However, account must be funded within 30 days to remain open.

    This is a promotional email from Morgan Stanley Private Bank, National Association. Click here to unsubscribe.

    Morgan Stanley Private Bank, P.O. Box 484, Jersey City, NJ 07303-0484

    Please see our Privacy Pledge for details about how Morgan Stanley handles personal information.

    Banking products and services are provided by Morgan Stanley Private Bank, National Association, Member FDIC.

    © 2025 E*TRADE from Morgan Stanley. All rights reserved. E*TRADE Copyright Policy







    Invest, spend, and earn 2.05% APY*–all through your brokerage account.
    Our goal at Robinhood is to democratize finance. This means delivering products that help you do more with your money and improve your life. Today, we're excited to introduce Cash Management, a new feature to give you more flexibility with your brokerage account.
    JOIN THE WAITLIST
    Flexible Spending
    Use your Robinhood debit card anywhere Mastercard® is accepted around the world.
     
    Earn 2.05% APY
    Your uninvested cash is moved to banks in our program that pay you 2.05% APY*. Like all variable rates, this could go up or down over time.
     
    FDIC Insurance
    Your cash in the program banks is eligible for up to $1.25 million of FDIC insurance, or up to $250,000 per bank, subject to FDIC rules.
     
    75,000+ ATMs
    Don't pay fees at any of the 75,000+ ATMs in our network.
    JOIN THE WAITLIST


    See the source image



    For the next two weeks, you can earn increasing levels of Stock-Back™ rewards when you shift your everyday spending to your Stash debit card.* 

    Every qualifying swipe over $5 gets you closer to leveling up your Stock-Back rewards. Levels start tomorrow and reset to zero on Monday, November 18.

    Follow Us

     

    Flag Counter


    Flag Counter

    Make a free website with Yola