The following is from a Chase Wholesale Broker Bulletin sent to me by “BZ” a senior loan officer in the mortgage business.

Chase has made a business decision to suspend our Non-Agency Fixed and ARM (Amortizing and Interest-Only) Product offerings within the Wholesale Lending Business.

We have made this decision based on a variety of reasons including the following:

· A dramatic reduction in Jumbo volume levels over the past six months
· A lack of Capital Markets appetite for Jumbo products
· Worse than expected delinquency performance on these loans

If it’s not a conforming Fannie Mae/Freddie Mac loan, Chase does not want any part of it.

US Bank Places Strict Requirements on Jumbos, and Second Loans

“BZ” also sent me the following notice from US Bank.

“INTEREST ONLY” PAYMENT OPTION:

1. For PURCHASE TRANSACTIONS: The Interest Only payment option will no longer be allowed for U.S. Bank Consumer Finance 1st liens when the LTV/CLTV exceeds 80%

2. For REFINANCE TRANSACTIONS: When the LTV/CLTV is greater than 80% on any U.S. Bank Wholesale ARM the following requirements will apply for the file to be eligible for Interest Only:

A) An escrow account for taxes, homeowners insurance (and flood insurance if applicable), and HOA fees if any will be required

B) A minimum of $250,000 of assets/reserves seasoned for a minimum of 60 days will be required.

WHOLESALE SECOND POSITION LOANS/LINES:

1. The maximum CLTV for any 2nd loan/line is now capped at 80% in the following states:

Maryland, Missouri, Connecticut, Ohio, New Hampshire, Minnesota, Virginia, Delaware, and Colorado.

Those US Bank restrictions on interest only loans are for jumbo loans only, the second note on Combined Loan To Value Ratio (CLTV) is across the board.

“BZ” pinged me with the following comments:

This is incredible; to get a refi with an arm with interest only payments, you need to have $250,000 in the bank! Mortgage money IS available; but only to those who don’t need it. This is more proof of your peak credit/credit crunch scenario.

Chase stops doing all jumbo arms AND fixed products with their wholesale lending business. This is what US Bank should have done instead of their ridiculous requirement of $250000 in liquid assets. US Bank is essentially saying that they don’t want to do this type of product, but the important point is there are still more restrictions being placed on mortgage lending“.

The CLTV US Bank restriction will eliminate the use of second loans to avoid PMI and caps home equity lines to 80% of the value of the property. I expect appraisals to be tight.

Other lenders will follow Chase and US Bank which means the cost of getting a jumbo loan, or any other type of non-conforming loan (if indeed you can get one at all), is going to soar. In addition, those wanting to raise cash via a second mortgage are going to find it much more difficult (or expensive), to do so.

The noose continues to tighten around the consumer and the homebuilder.

Mike “Mish” Shedlock
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