JPMorgan Chase Stops Accepting HELOC Applications Due to Coronavirus Shock

In a move that has the potential to reinforce or accentuate the viability of reverse mortgages for some, JPMorgan Chase has temporarily halted acceptance of applications for home equity lines of credit (HELOCs) due to the ongoing economic effects of the COVID-19 coronavirus pandemic, specifically the combined impacts of rising rates of unemployment and initial projections that home prices could fall.

This is according to a Thursday announcement detailed in a story published at American Banker and confirmation by Chase to RMD, continuing to show that mainstream lending institutions are tightening in response to the outbreak.

The bank – with a reported $3.1 trillion in assets under management – says it is taking the step to prepare for a surge in homeowner defaults, requiring action on risk mitigation in the housing market.


“Due to the economic uncertainty, we’re temporarily pausing new applications for home equity lines of credit,” said Trish Wexler, chief communications officer for Chase consumer and community banking in an email to RMD. “Customers can still tap into their home’s equity through a cash-out refinance of their existing mortgage.”

“Due to the economic uncertainty created by COVID-19, we’re temporarily not accepting applications for new home equity lines of credit (HELOC),” Chase said in a section on its website. “This will protect both you and the bank.”

For those consumers who had already applied for a HELOC prior to these changes going into effect, the bank will “continue to review” those applications and will contact the applicant directly with their decision.

Earlier this week, JPMorgan Chase CEO Jamie Dimon warned that the bank was preparing for a worst case scenario in which the economy remains closed for a longer period than is expected, and that the bank’s credit costs could exceed $45 million, according to CNBC.

Chase previously announced that it had changed its underwriting standards to ensure borrowers have home equity in the event of a drop in home prices, and consumers applying for a home purchase loan will need to have a minimum FICO credit score of 700 and a down payment of 20%, according to a statement by by Amy Bonitatibus, chief marketing officer at Chase Home Lending to American Banker.

The proprietary reverse mortgage market has seen lenders make adjustments to available offerings in response to the pandemic, with both Reverse Mortgage Funding (RMF) and Liberty Reverse Mortgage suspending their proprietary products for the time being.

Finance of America Reverse (FAR) announced that there would be alterations to its HomeSafe product suite for the time being, while Longbridge Financial also announced changes to its Platinum line of private-label reverse mortgages due to the economic crisis, including raising the minimum FICO credit score from 640 to 680.

Read the article at American Banker.

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  • We have seen this before but the impact was much worse.

    Total HECM endorsements for fiscal years 2007, 2008, and 2009 were 334,672. The next three fiscal years (2010, 2011, and 2012) had total HECM endorsements of 194,422. That is a percentage drop of 41.9%.

    Total HECM endorsements for fiscal years 2014, 2015, and 2016 were 158,572 while total endorsements for fiscal years 2017, 2018, and 2019 were 131,054 for a percentage drop of 17.4%.

    The trouble is that between 2009 and 2019, the industry has never recovered from the loss of HECM endorsements from 114,785 (for fiscal 2009) down to 31,.274 HECM endorsements (for fiscal 2019) for a percentage drop of 72.8% in just 10 years from total fiscal year endorsements.

    Can we put much confidence in what counseling tells us? While counseling may have it right, accuracy in reporting is questionable. For example, about nine years ago we were being told of a reason to be concerned by data coming out of counseling. That data said that the age of the average BORROWER was dropping too quickly. That turned out to be misdirection from overreliance on a new program used in counseling known as the financial interview tool or FIT.

    We should have much greater reliance in the monthly FHA Production Reports where we find FHA reporting on HECM Case Number Assignments for a month. After all if the counseled applicant is interested in getting a HECM how can they do it without getting a Case Number assigned to their application? We know that for each modified and annualized fiscal year, there are more counseling sessions than Case Number Assignments and more Case Number Assignments than HECM endorsements.

  • No one can doubt the accuracy of Jim Veale’s statistics, in fact, Jim is one of the best in the industry when it comes to given us the statistics of the past, present and his predictions on the future.

    However, there is a vast amount of potential business out there to be had in the reverse mortgage space. The need is tremendous in today’s environment and the amount of liquidity in the hands of senior Home owners are the highest ever!

    In short, the statistics given by Jim are gloomy, no doubt about it, but they are factual.

    However, as an originator, one has to bypass those statistics and capitalize on the opportunities available to us all! Our senior Home owners are looking to create security cushions without occurring additional outlays of monthly expenditures. What better way than with a reverse mortgage that has as one of its features, the line of credit benefit. Plus, if there is any debt against the property, that would be paid off, reducing outlays of capital each month.

    The reverse mortgage could be a great way to hedge against the volatility and uncertiny that looms in the stock market. Also, many seniors have children and grandchildren that are facing very rough times right now, this could be a great time for a senior with a lot of equity in there home to help out family members in need.

    There are so many areas of need that a senior Home owner would have today for a HECM that may not be present when we recover and we will recover from this Pandemic!

    Be positive, build your business portfolio and at the same time, help a lot of seniors out there!

    God speed to all,

    John A. Smaldone

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