[Update 1: Now includes FHA response]
According to the FHA, “This is not an accurate representation of FHA’s credit requirements.” The CEO of Chase Mortgage Banking did not get all his facts in order when he made these comments.
Kevin Watters, CEO of Chase Mortgage Banking, said in an interview with CNBC on Monday that the Federal Housing Administration’s loan requirements look an awful lot like subprime lending.
“FHA requirements are down to a 520 FICO (credit score) and you only have to put 3.5% down; that’s subprime lending, and we’re not in the subprime lending business,” CNBC quotes Watters saying.
Jason Lobo, a spokesperson for JPMorgan Chase (JPM), said Watters is only reiterating standards the company already holds.
However, this is noteworthy since at the beginning of the month the U.S. Department of Housing and Urban Development released a revision to its previously announced proposal to change the FHA loan level and lender certifications that each lender must adhere to.
The previous proposal eliminated the requirement that lenders approved by the FHA certify on each loan application that they are not, or have not recently been, subject to certain charges or penalties.
The new proposal from HUD reinstates that stipulation, but made it part of the annual lender certification instead of the loan level certification, as it was prior to the first round of proposed changes.
JPMorgan isn’t the only major bank to reiterate or change its stance with FHA loans.
John Shrewsberry, Wells Fargo’s (WFC) CFO, said last Wednesday that the San Francisco bank will not make loans to FHA borrowers with low credit scores because of their higher rates of default.
