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JPMorgan Chase tightens standards for jumbo loans in Manhattan

Fears of falling prices as pandemic exodus reduces demand

JPMorgan Chase has tightened mortgage terms on jumbo loans for co-operatives and condominiums in Manhattan amid shrinking buyer demand, Bloomberg reported on Friday.

Chase announced that, beginning this week, it would limit jumbo loans to 70% of the sale price. The new standards apply to loans of more than $765,600 not guaranteed by Fannie Mae and Freddie Mac — which account for 95% of the Manhattan market, according to the report.

JPMorgan’s new loan-to-value restrictions will apply to all Manhattan apartments, including re-sales and co-ops, many of which are relatively affordable, older units that price sensitive buyers turn to first.

A JPMorgan spokesperson confirmed the new loan terms are due to “current economic conditions.”

Jonathan Miller, real estate appraiser and consultant with Miller Samuel Inc., told HousingWire it’s “unusual” for one of the New York boroughs to be singled out.

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“Manhattan is one of the highest-cost housing markets in the United States, and a large chunk of the mortgage loans are jumbo,” he said. “But the Manhattan market has been the slowest to recover because its residents have the most wealth and mobility in the city. Large numbers were able to leave with COVID lockdown occurred.”

Miller added that the lack of a vaccine has discouraged many who initially left from returning to Manhattan.

“That’s weakening the market as prices have softened,” he said. “Unlike conforming lenders, many jumbo loans are held in portfolio, and future economic conditions are awash in uncertainty at the moment.”

Melissa Cohn, a mortgage lender and broker with William Raveis Mortgage, added that an influx of condominium inventory in New York City created “a perfect storm.”

“Prices have fallen by a greater percentage in New York City than anywhere else in the country,” Cohn said. “Chase and other lenders have chosen to restrict loan values in order to protect themselves.”

Cohn added that many lenders are following similar paths during the pandemic: raising maximum credit score requirements, lowering maximum loan amounts, requiring more cash reserves, and even limiting or eliminating home equity loans

In March, HousingWire asked the question “Did non-QM just disappear from the market?” as many of the biggest lenders specializing in lending to borrowers outside the Qualified Mortgage lending box were pausing their activities due to uncertainty in the market. The two main holdouts were Angel Oak Mortgage Solutions and Citadel Servicing, which remained in the non-QM lending business as long as possible before eventually bowing out. 

But non-QM lending staged a comeback in May, as several companies that halted non-QM lending in March went back on the market, including Sprout Mortgage, GreenBox Loans, and Angel Oak.

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