In a move that has the potential to reinforce or accentuate the viability of reverse mortgages for some, JPMorgan Chase has temporarily halted acceptance of applications for home equity lines of credit (HELOCs) due to the ongoing economic effects of the COVID-19 coronavirus pandemic, specifically the combined impacts of rising rates of unemployment and initial projections that home prices could fall.
This is according to a Thursday announcement detailed in a story published at American Banker and confirmation by Chase to RMD, continuing to show that mainstream lending institutions are tightening in response to the outbreak.
The bank – with a reported $3.1 trillion in assets under management – says it is taking the step to prepare for a surge in homeowner defaults, requiring action on risk mitigation in the housing market.
“Due to the economic uncertainty, we’re temporarily pausing new applications for home equity lines of credit,” said Trish Wexler, chief communications officer for Chase consumer and community banking in an email to RMD. “Customers can still tap into their home’s equity through a cash-out refinance of their existing mortgage.”
“Due to the economic uncertainty created by COVID-19, we’re temporarily not accepting applications for new home equity lines of credit (HELOC),” Chase said in a section on its website. “This will protect both you and the bank.”
For those consumers who had already applied for a HELOC prior to these changes going into effect, the bank will “continue to review” those applications and will contact the applicant directly with their decision.
Earlier this week, JPMorgan Chase CEO Jamie Dimon warned that the bank was preparing for a worst case scenario in which the economy remains closed for a longer period than is expected, and that the bank’s credit costs could exceed $45 million, according to CNBC.
Chase previously announced that it had changed its underwriting standards to ensure borrowers have home equity in the event of a drop in home prices, and consumers applying for a home purchase loan will need to have a minimum FICO credit score of 700 and a down payment of 20%, according to a statement by by Amy Bonitatibus, chief marketing officer at Chase Home Lending to American Banker.
The proprietary reverse mortgage market has seen lenders make adjustments to available offerings in response to the pandemic, with both Reverse Mortgage Funding (RMF) and Liberty Reverse Mortgage suspending their proprietary products for the time being.
Finance of America Reverse (FAR) announced that there would be alterations to its HomeSafe product suite for the time being, while Longbridge Financial also announced changes to its Platinum line of private-label reverse mortgage loan due to the economic crisis, including raising the minimum FICO credit score from 640 to 680.
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