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Major bank's decision could impact Florida homebuyers

JPMorgan Chase is taking steps to make fewer home loans to those who have poor credit despite government guarantees and other insurance programs that are intended to protect lenders in the event of a foreclosure. Despite all of these guarantees, the bank says that the cost of going through the foreclosure process is still too high. In 2007, the average foreclosure took 120 days, compared to the current average rate of 572 days.

It is thought that lending to first-time homebuyers could slow if other large banks decide to follow JPMorgan's lead. However, many smaller lenders are loosening requirements and are starting to take a look at subprime borrowers again. This is especially true of non-bank lenders, and the average credit score of a borrower in the last 18 months has been falling.

On July 15, JPMorgan Chase announced that it had lost $74 million on mortgages in the second quarter of 2014, which is lower than the $566 million in income that it reported for the same quarter in 2013. Part of the reason why it is pulling back has to do with the fact that it has clashed with the Federal Housing Administration, which provides guarantees to banks in exchange for borrowers being able to finance up to 96.5 percent of the purchase price.

While there are many programs available to help first-time homebuyers and those with poor credit, the lender has the ultimate say in whether or not to lend the money. In addition, it may impose rules above and beyond what the government imposes on borrowers. Those who are in the market for a home and would like help finalizing a purchase contract may wish to speak with a real estate attorney.

Source: Reuters, "Update 1-JPMorgan pulls back from mortgage lending on foreclosure worries", David Henry, July 15, 2014

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