plans to stop offering certain Alt-A mortgages.
The New York banking company said in an internal memo on Wednesday that all mortgage loan locks and underwriting under the ChaseFlex "No Doc" or "No Ratio" programs must be completed by Sept. 19.
As home prices soared over the last few years, Alt-A loans became popular among borrowers with less-than-perfect credit histories who have better credit than the so-called subprime borrower. But as home prices have fallen, lenders large and small have been hit hard by rising delinquencies and defaults on these mortgages.
Lenders have fired thousands of workers and closed up shop by the score as the market for mortgage-backed securities has dried up.
JPMorgan Chase originates $170 billion in residential mortgages and home equity loans annually and services more than $500 billion worth of loans.
In July, JPMorgan Chase ceased offering 2/28 and 3/27 adjustable-rate subprime mortgages, which have caused much of the problems in the subprime industry. Loans such as the 2/28 ARM have a fixed rate for the first two years of life and then reset to a much higher interest rate, sometimes doubling a borrower's monthly payment.
"We're sort of moving along a continuum," a Chase spokesman says. "We're taking a more disciplined approach and in the process reduced our risk because the borrower has more stake in the game -- either their own cash, a better credit rating or proven their documented income or assets."
"Some places maybe stopped doing Alt-A altogether," he adds. "We're just requiring more documentation and/or higher FICO scores and/or more of their own equity in the house."
The news comes as
First Franklin looks to close certain loan processing centers, according to market chatter.
The San Jose, Calif.-based wholesale mortgage lender, which Merrill acquired last year from
, has reportedly shut down six of its 28 loan centers.
First Franklin, which up until this year was primarily a subprime lender, has recently added Alt-A mortgages to its lineup.
"First Franklin has been successful over 26 years because of its ability to adapt to changing market conditions," a spokesman said. "We have adjusted our staffing levels to be in line with current business requirements."
The spokesman declined to comment further on any specific details on the staff downsizing.