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NEW YORK (Reuters) – JPMorgan Chase & Co <JPM.N>, the country’s largest lender by assets, 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.

From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value.

The change highlights how banks are quickly shifting gears to respond to the darkening U.S. economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.

“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.

The bank was the fourth largest U.S. mortgage lender in 2019, according to industry publication Inside Mortgage Finance.

The changes should help JPMorgan reduce its exposure to borrowers who unexpectedly lose their job, suffer a decline in wages, or whose homes lose value. The bank said the change will also free up staff to handle a surge in mortgage refinance requests, which are taking longer to process due to staff working from home and non-essential businesses being closed.

Refinancing requests jumped to their highest level in more than a decade last month as average rates on 30-year fixed-rate mortgages, the most popular home loan, fell to near record lows, according to data from the Mortgage Bankers Association (MBA).

JPMorgan would not disclose the current minimum requirements for its various mortgage products, but the average down payment across the housing market is around 10%, according to the MBA.

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.

The U.S. housing market had been on a steady footing earlier this year, but with a deepening recession and would-be home buyers unable to view properties or close purchases due to social distancing measures, the health crisis now threatens to derail the sector.

The residential mortgage market is already under strain after borrower requests to delay mortgage payments rose 1,900% in the second half of March, Reuters reported.

The National Association of Realtors last month said home sales could fall by around 10% in the short-term, compared to historical sales for this time of year. A Federal Reserve March consumer survey said home prices were expected grow 1.32% over the year, the lowest reading since the survey began in 2013.

https://www.yahoo.com/finance/news/exclusive-jpmorgan-chase-raise-mortgage-221128934.html

The Federal Reserve made an emergency announcement Sunday afternoon by announcing that it would be cutting interest rates to zero for the first time since the financial crisis.

The central bank said it will use its “full range of tools” to battle the economic impacts of the novel coronavirus and announced quantitative easing in the form of at least $700 billion of asset purchases. It also encouraged banks to provide credit to the economy by eliminating reserve requirements and allowing the financial firms to tap into capital and liquidity buffers.

In a global effort, the Fed also announced standing U.S. dollar liquidity swap line arrangements in coordination with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. 

“The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals,” the Fed said in a statement.

The Fed said the coronavirus outbreak “harmed communities and disrupted communities in many countries,” adding that the U.S. labor market still appeared “strong” as the U.S. economy rose at a “moderate rate.”

But the Fed on Sunday slashed rates by 100 basis points, less than two weeks after it had already made an impromptu 50 basis point cut. 

“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

The Fed also resumed the crisis-era policy of large-scale asset purchases by committing to Treasury purchases of at least $500 billion and agency mortgage-backed securities of at least $20 billion “over coming months.”

The central bank was scheduled to hold a Federal Open Market Committee meeting on March 17-18 with a policy announcement on March 18. In the face of accelerating cases of the coronavirus around the world, the Fed pulled the decision forward.

Maintaining credit

The Fed said it is “carefully monitoring credit markets,” where market liquidity has been a concern as markets churned over the impact of the coronavirus.

The central bank announced a number of measures on Sunday to motivate banks to support businesses as quarantines around the country raise concerns that businesses will have to close their doors and possibly lay off workers.

As a key regulator of the banks, the Fed said the financial institutions should feel comfortable tapping into the discount window as a tool for addressing “potential funding pressures.” In the past, banks have been hesitant to tap into the direct lines of funding because of the stigma associated with relying on the Fed for emergency funds.

The Fed said banks were welcome to borrow from the discount window for periods as long as 90 days, “prepayable and renewable by the borrower on a daily basis.”

The Fed also said firms could use their capital and liquidity buffers to lend, and reduced reserve

requirement ratios to zero percent effective on March 26. 

“This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses.”

https://finance.yahoo.com/news/federal-reserve-cuts-rates-to-zero-restarts-quantitative-easing-qe-210001968.html