January proved to be yet another month with low mortgage activity. That prompted big banks such as Wells Fargo and JPMorgan Chase to also lower their underwriting standards, reports Philip van Doorn in thestreet.com.
The author sites statistics from the Mortgage Bankers Association (FBR), predicting that originators of one-to-four family mortgage loans will decline from $1,755 trillion in 2013 to an estimated $1,116 trillion in 2014. Simultaneously, the refinancing has slowed with the increase of long-term interest rates.
Major lenders such as Wells Fargo has lowered the minimum FICO score from 640 to 600. That change will affect borrowers applying for loans insured by the Federal Housing Administration. At the same time, JPMorgan Chase is considering a lower loan-to-value (LTV) standards in certain markets.
After a number of years with stringent credit standards, those changes could mean a major twist in the U.S. mortgage market at all levels, according to the article.
FBR analyst Paul Miller observed: “We have long argued that in the absence of robust refinancing volumes, banks are likely to go down the credit spectrum with respect to borrowers in order to support purchase origination activity.”
Read the story on The Street