Chase Eliminates Stated & No Income Alt-A Loan Types

In another case of “what took so long?” Chase has announced the elimination of their no income and stated income ChaseFlex loan types.  The change, announced yesterday, goes in to effect on the 19th.  Just the latest in a long line of investors who find that secondary market buyers want to see proof of capacity to repay; something that was minimized in favor of credit score over the last few years.  As we’ve maintained - “FICOs can’t make your mortgage payment” and the market seems to finally be agreeing.

From the announcement:

As a responsible lender and investor, we continue to monitor the lending environment and make changes as necessary. The security of our customers, employees, and shareholders is our highest priority, and as such, we are charged with ensuring that our products and policies remain prudent and further support our commitment to help borrowers sustain home ownership.

When reviewing product performance, we find adequate documentation is a key risk driver in loan repayment. From a financial standpoint, we need to take this risk component into account when making loans in this environment.

Consequently, we have decided to eliminate the ChaseFlex No Doc and No Ratio programs from our Alt A product suite effective September 19, 2007.

While there will be hold outs it appears a certainty that lack of capacity will only be tolerated on low LTV and high FICO loans - and little else.  Seems to me like we’re getting back to “common sense” in a hurry - which has to be seen as a good thing.

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