Moody’s Investors Service announced it is downgrading its assessment for JPMorgan Chase Bank’s jumbo residential mortgage originator from strong to above average.
This change was driven by a significant increase in loans acquired from Chase’s correspondents with delegated underwriting authority.
Moody’s explained its assessment is based on strong collateral performance of Chase’s prime jumbo residential mortgage loans, above average lending practices for prime jumbo residential mortgage loans and above average operational stability.
But Chase disputed the downgrade, saying it was based on insufficient information.
“We respectfully disagree with the rating and feel it’s based on insufficient information,” a Chase Home Lending spokesperson told HousingWire. “While we provide select correspondent lenders with delegated underwriting authority, we also then conduct individual underwriting reviews on roughly half of those loans. These are high-quality loans that perform well.”
Chase originated 187,980 prime jumbo residential mortgage loans, a total of about $147.1 billion, during the 69-month period ending September 30, 2017. But during that time, Chase acquired about 63% of its jumbo loans through its correspondent channel. Its remaining loans were originated through its retail and consumer direct channels.
In the assessment, Moody’s reviewed Chase’s loan performance and originator ability, which included analyzing its ability to accurately assess borrowers' willingness and ability to repay their mortgage loans, its ability to accurately and objectively assess property value and its ability to acquire loans closed in accordance with laws and regulations. The assessment also took into account Chase’s financial strength and support functions to determine its originator stability.
Moody’s report explained that the bank’s new loan origination system, Mortgage Express, is not visually intuitive and lacks innovations the company has seen in other systems.
“Chase’s new LOS system is unique in that it uses a character user interface, compared to the graphical user interface, technology typically used by other originators that we have assessed,” the report stated.
But once again Chase disagreed.
“The LOS comments were solely based on back-end aesthetics and not the capabilities and innovative solutions it brings to our customers,” the spokesperson said. “We are in the final stages of rolling out a digital mortgage experience nationally. The feedback from customers has been overwhelmingly positive.”