When JPMorgan Chase announced that it is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption, the initial reaction might be concern. Hold on and take a deep breath. Taking a closer look at this reveals that those applying for a new mortgage will need a credit score of 700, and a down payment equal to 20% of the home’s value. That is a pretty high hurdle for many buyers, but it is definitely a prudent measure, considering the recent explosion in lost and furloughed jobs. The standard acceptable mortgage down payment is currently about 10% throughout the industry.
We still don’t know what impact 20 million unemployed will have on the overall economy. Clearly JPMorgan Chase has never been an institution looking to lock-in a fast buck. Jamie Dimon has distinguished his tenure by clear thinking and methodical approaches to whatever macro dynamics were in play.
Economic uncertainty is calling for certain preventative protocols to be put into place, especially when interest rates stand at these historic low levels.
These new guidelines are intended to mitigate the bank’s exposure to borrowers who have lost or might lose their job, experience a decline in income, or find it difficult to cover their mortgage payments.
Chase, as are other banks, is finding that there is a surge in requests for mortgages at this time, and are deploying staff to handle the increased applications for refinancing, which have hit the highest levels in more than a decade.
Up until February 2020, the U.S. housing market has been on a steady upward ride. Inventory shrinkage has slowed the trajectory, as well as shortages in skilled labor within the construction industry.
As posted in the earlier Counsellors Title blog from April 13th, the mortgage market is under severe strain after forbearance requests to delay mortgage payments climbed 1,900% in the second half of March.
In the short-term, the National Association of Realtors projected home sales could fall by as much as 10% on a comparative year-to-year basis. This most likely will also have a negative impact on both the average and median sales price for single-family homes. In February, the average and median sales price in New Jersey increased significantly, climbing 8.6% and 10.3%, respectively. In March 2019, the average and median sales price in New Jersey year-to-year increased 3.4% and 5.3%, respectively.
Also, in February 2020, the number of closed sales of single-family homes jumped by 5.5%, with inventory plummeting 28.8% to just 3.7 months supply. It is anticipated single-family sales and inventory will both fall, reflecting the impact of the COVID-19 pandemic.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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