Bank of America Corp., which has hired 1,000 loan officers during the past year, plans to continue adding staff to aggressively go after home-purchase business as refinances slow, said spokesman Terry Francisco.
The company is doing more lower-down-payment originations because mortgage insurers are getting more comfortable with them as home prices rise, he said. The company is considering lowering its down-payment requirement for jumbo loans to 15% from 20%, he said.
“We would never change credit conditions due to market pressures,” he said. “Any changes would be based on economic factors.”
Vickee Adams, a Wells Fargo spokeswoman, said there are “lots of opportunities for refinancing and purchasing activity. The most important thing for prospective borrowers is to work with an experienced mortgage professional to identify their best loan option.”
Citigroup spokesman Mark Rodgers declined to comment. Tom Kelly, a spokesman for JPMorgan Chase & Co., couldn’t be reached for comment.
Lenders raised standards after the housing crash compelled the government to rescue Fannie Mae and Freddie Mac and bondholders forced them to buy back faulty loans. In all, poorly underwritten mortgages have cost five banks -- Wells Fargo, Bank of America, JPMorgan Chase, Citigroup Inc. and Ally Financial Inc. -- at least $94 billion in the six years ending 2012.
Mortgage originators remain concerned that the government- supported mortgage guarantors will force them to repurchase loans if they make underwriting mistakes.
“What we’ve seen in the last three or four years is that lenders were so skittish about doing something wrong,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade journal. “They said let’s do the safest loans on earth. What’s prodding them away from that is being more comfortable with the quality of loans and also the fact of life that unless they start being more flexible, volumes will go down.”
While underwriting standards are far more restrictive than they were during the real estate boom, lenders are becoming more flexible, said Cecala. They’re dialing back documentation requirements for jumbo loans for pricier properties and allowing lower down payments even for conventional mortgages, he said.
Zillow Mortgage Marketplace, an online comparison shopping site for home loans, saw a 570% increase in the number of lenders offering conforming loan quotes with down payments of 3.5% to 5% in March 2013 compared with two years earlier, said Erin Lantz, director of the site, which received 15 million loan requests during the past 12 months.
“More lenders are willing to lend to borrowers with lower down payments -- it’s an indication that they are able to extend credit more broadly,” Lantz said.
More buyers are also getting low down-payment loans backed by government sponsored mortgage enterprises, Fannie Mae and Freddie Mac, said Credit Suisse Group AG mortgage strategists Mahesh Swaminathan and Vikram Rao.
In May, 20% of purchase mortgages in the U.S. were Fannie Mae or Freddie Mac loans requiring private mortgage insurance, up from 9% two years earlier. The share of Federal Housing Administration and Veterans Administration mortgages remained at about 40% in May from May 2011.
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