JPMorgan Chase & Co. is making sweeping changes to its wholesale lending programs -- including the elimination of Alternative-A programs, the reduction of loan-to-values in declining markets and an increase in the required minimum credit scores on some programs.
Citing declining home prices, rising delinquency on reduced documentation and high LTV mortgages, and little interest from investors on non-conforming loans, the New York-based company notified its brokers that it is eliminating its Alt-A suite of products effective Wednesday.
"Declining home prices have affected many markets across the country and are forecasted to continue declining in the upcoming months," the notice stated. "Policy changes on declining markets are necessary to manage risk in this volatile market."
In addition to Alt-A programs, Chase is also curtailing interest-only MyCommunityMortgage originations, according to the Prime Broker Bulletin distributed yesterday. The stated income stated asset will no longer be offered through its "ZiPPY" program.
Minimum FICO scores will be raised to 660 for non-agency LIBOR adjustable-rage mortgages, while it will be raised to 720 for non-agency 40-year loans and non-agency interest-only loans. In addition, the maximum LTV will be limited to 95 percent on agency loans and 90 percent on non-agency loans.
The move will result in the discontinuation of the 103 percent non-agency LIBOR ARM.
Combined LTVs have been reduced to 95 percent on all agency loan products -- with no exceptions, though Chase's DreaMaker Opportunity, MyCommunityMortgage and HomePossible programs are not impacted by the move.
Chase, which has largely escaped the massive loan writedowns reported by its competitors, said it will no longer allow the use of non-traditional credit on conventional programs.
In markets that Chase has identified by Fannie Mae's DU as declining, the maximum LTV on agency products will be reduced by 5 percent. Non-agency products and agency products that don't utilize DU will require a manual process to determine if the property is in a declining market.
Currently, the lender has identified Arizona, California, Colorado, Florida, Idaho, Maine, Maryland, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington, D.C., as declining markets.
But even if the property has not been identified as being in a declining market, the LTV will still need to be reduced by 5 percent if the appraiser notes the property is in a neighborhood of declining values.
"While these changes represent a substantial move in product offerings, the change supports Chase's continued commitment to wholesale while weathering the economic climate," the company stated.
Today is the last day to lock loans under old program guidelines, the bulletin said.
Government programs, including loans insured by the Federal Housing Administration and guaranteed by the Department of Veterans Affairs, are unaffected by the program changes.