Mortgage Lending Standards Tighten due to COVID-19

If you haven’t heard already, it is harder to obtain financing for real estate purchases. Forbearance is being forced on banks. They are required to let borrowers skip mortgage payments. They can recoup the missing payments with interest later, but for now they have a liquidity problem. They are not going to make risky loans.

In addition, borrowers are losing their jobs, if they haven’t lost them already, due to the COVID shutdown. Banks are conducting second income verifications, a couple of days before closing.

This could spell bad news for real estate markets everywhere. If buyers can’t get loans, demand for real estate goes down. Here are some articles discussing how it is becoming harder for buyers (not just investors) to obtain loans.

Chase now requires 700 FICO score, 20% down payment to buy a home:

https://www.cnbc.com/2020/04/11/jpmorgan-chase-to-raise-mortgage-borrowing-standards-as-economic-outlook-darkens.html

Mortgage Loans Get Harder To Come By As Lenders Tighten Standards:

https://www.forbes.com/sites/alyyale/2020/04/12/mortgage-loans-get-harder-to-come-by-as-lenders-tighten-standards/#7b9ee66a4f2a

Mortgage rates go up slightly as some lenders tighten restrictions on who qualifies for a home loan:

https://www.marketwatch.com/story/mortgage-rates-go-up-slightly-as-some-lenders-tighten-restrictions-on-who-qualifies-for-a-home-loan-2020-04-23

Tightened lending will reduce demand for real estate. On the other hand, we have unlimited quantitative easing. As some point, that should translate to inflation, increasing the value of hard assets.