Wells Fargo said Monday that it decided to stop accepting applications for all new home equity lines of credit (HELOC) due to current market conditions.
Michale King, VP of Corporate Communications, Southwest Region, of Wells Fargo said the bank made the decision to temporarily stop accepting HELOCs temporarily due to “uncertainty around the timing and scope of the anticipated economic recovery.”
“The temporary suspension of HELOC applications will continue until our analysis of market conditions indicates that it is appropriate to resume the responsible extension of HELOCs to homeowners,” King said.
A report by the Charlotte Business Journal revealed JPMorgan Chase & Co. stopped accepting applications for HELOCs in April. Bank of American continues to offer new HELOCs.
A Chase Home Lending Spokesperson said the bank is temporarily balancing its risk so it can support "our customers when they really need it."
“To protect our customers and our bank through economic uncertainty, we’re temporarily strengthening our credit standards across the board—and in some cases, either pausing new applications or focusing on established customers only," the Chase Home Lending Spokesperson said.
The report added Wells Fargo will have employees move from working on HELOCs to processing mortgages for home purchases and refinances, which is a growing segment of the market due to low-interest rates.
Freddie Mac’s Primary Mortgage Market Survey revealed the average rate for a 30-year fixed-rate mortgage fell to 3.23%—the lowest rate in the 49-year history of the survey.
“The size and depth of the secondary mortgage market are helping to keep rates at record lows. These low rates are driving higher refinance activity and have modestly helped improve purchase demand from their extremely low levels in mid-April,” said Sam Khater, Freddie Mac’s Chief Economist. “While many people are benefiting from low mortgage rates, it’s important to remember that not all people are able to take advantage of them given the current pandemic.”
Redfin also found that its Mortgage Credit Availability Index fell 16% in March to its lowest levels in five years. The report said banks are growing wary of borrowers requesting delayed payments in forbearance programs.
As estimated 25% of the loans written by Redfin last quarter may not have been possible to originate under new standards.
JPMorgan Chase raised its credit score minimum to 700 and began requiring applicants to have enough savings for a 20% down payment. Wells Fargo is also shying away from riskier loans for borrowers who are unable to provide down payments of 20% and increased its FICO-score requirement to 680.
Additionally, Reverse Mortgage Daily reports that a group of attorneys from 27 states, led by New York Attorney General Letitia James, sent a letter to the Secretary of the U.S. Department of Housing and Urban Development (HUD), Dr. Benjamin Carson, requesting HUD to take further actions to protect seniors with Home Equity Conversion Mortgages who have been impacted by COVID-19.
The report states that while the group approves of HUD’s recent actions, the response to protect seniors has been lacking.
“Our national response […] must continue to evolve to meet the impact of COVID-19,” the letter reads. “The proposals outlined in this letter are based on our collective experience with past disasters and financial crises, and our acknowledgment that COVID-19 will present unprecedented challenges to senior homeowners and the mortgage servicing industry. We urge HUD to implement these recommendations to ensure that senior homeowners are given a fair opportunity to retain their home as we fight this pandemic together.”