The Thriving Investor Success With Investing
Many of you have asked me what I thought about the article that was put out on the new guidelines for Chase bank and here are my thoughts…
First – Headlines are designed to sell newspapers and create fear in lives of the people who read them.
Chase bank is changing up their lending guidelines; now borrowers must have a credit of 700+ and 20% down on home purchases. What does this mean and what kind of an impact will it have on our economy?
Let’s first look at how much of the market Chase SFR lending arm controls across the US.
In 2019 Chase Mortgage did $105.20 Billion, with 33.3B in the 4th quarter alone. (credit: Housing Wire – big banks)
The US Gov. currently holds 11.2 Trillion in SFR Mortgages. They are the #1 holder of US Mortgages. Chase Mortgages’ contribution to this is less than 0.0001% of all the mortgages currently held by the US Government.
The change in the underwriting guidelines were more of a PR move then a reflection of their control or contribution to the US lending markets.
Their change in underwriting will affect less then 1% of the applicants that they receive. Also keep in mind that if someone is turned down by Chase, they will simply move their loan to a different lender for approval. This is more of a financial loss to Chase then the borrower or the markets.
Also keep in mind that most borrowers will either use their personal bank for a loan OR take the advice of their realtor to use a mortgage company that has a proven track record with the realtor.
There are over 7800 banks in the US – Not branches; Individual banks that operate under the FDIC. Chase is just one of these.
Quicken Loans is the nation’s largest lender with $145B in lending in 2019.
Here is list of the top 10 mortgage lenders in the US as of April 2020
- Quicken Loans: Best Overall
- SoFi: Best Online
- loanDepot: Best for Refinancing
- New American Funding: Best for Poor Credit
- Lenda: Best for Customer Service
- Citi Mortgage: Best for Low Income
- Guaranteed Rate: Best Interest-Only
- Wells Fargo: Best Traditional Bank
- Busey Bank: Best Traditional Bank Mortgage for Customer Service
- PennyMac: Best Lender for a Low-Down Payment
My personal favorite: United Wholesale Mortgage, A direct competitor of Quicken Loans.
As far as the effect this will have on the seller financing market, (which is a 1.7T carve out in the US real estate markets) it will have ZERO impact because prior to Chase changing their underwriting guidelines they never lent to borrowers below a 620 credit score. (see next paragraph taken from the article)
“The new credit standards do not apply to JPMorgan’s roughly four million existing mortgage customers, or to low and moderate income borrowers who qualify for its “DreaMaker” product, which requires a minimum 3% down payment and 620 credit score.”
RE: The Article in Yahoo Finance.
The Seller Financing / Seller Carry Back Market is mostly (85+% ) made up of borrowers with less than a 620-credit score which would never be considered by Chase or any other lender in the marketplace. The reason for this is because anyone with less then a 620-credit score is classified as “HIGH RISK” and falls into the bottom 20% of credit borrowers in the US. Lending to the bottom 20% of borrowers in the US is was a major factor in the credit crisis of 2008.
In the end, whoever Chase turns down for a loan under their new guidelines, will simply go to another lender to get their loan done. These changes will have ZERO impact on the lives of people buying homes, but it will have an impact on the bottom line and reputation of Chase Bank because they will be turning away their own account holders leaving them with a neg. experience of how Chase treated them during this crises.
To your success,
Troy Fullwood
Editor- The Thriving Investor.
Link to the Article:
https://finance.yahoo.com/news/exclusive-jpmorgan-chase-raise-mortgage-221128934.html