J.P. Morgan Loosens Terms for Jumbo Mortgages

 J.P. Morgan Chase & Co. is loosening its underwriting criteria for big mortgages, as lenders ramp up competition to grab a bigger share of the high-end housing market.

The nation’s largest bank by assets plans to announce Wednesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.

The New York firm’s moves follow similar steps at Bank of America Corp. , Wells Fargo & Co. and other banks on requirements for “jumbo” mortgages—those that exceed $417,000 in most parts of the country or $625,500 in pricier markets. At the same time, some big banks are backing away from smaller loans where they see higher regulatory costs and litigation risks.

Since the financial crisis, a recovery in the mortgage market has faced several challenges, but the jumbo market—popular with well-heeled borrowers—has bounced back along with sales of higher-priced homes. In the second quarter, overall jumbo originations rose to an eight-year high of $93 billion, up 58% from a year ago, according to a preliminary estimate from industry newsletter Inside Mortgage Finance.

By dollar volume, jumbo mortgages given out by lenders last year accounted for about 20% of all first-lien mortgages, used mostly to purchase or refinance a home, according to Inside Mortgage Finance. That is up from 5.5% in 2009. The last time jumbo mortgages accounted for a larger share was in 2005.
“There’s no question that the jumbo market has probably recovered more than any sector of the mortgage market since the housing crisis,” said Guy Cecala, publisher of Inside Mortgage Finance.

Lenders have more flexibility to change criteria for jumbo mortgages, as they generally hold them on their own books. Many smaller home loans are sold by lenders to mortgage-finance giants Fannie Mae and Freddie Mac, and must conform with their criteria.

source: http://www.wsj.com/articles/j-p-morgan-loosens-terms-for-jumbo-mortgages-1438709863