The change reflects the company's weaker valuation, underwriting, and technology
Moody's has downgraded its assessment of JPMorgan Chase Bank as a prime jumbo residential mortgage originator from “Strong” to “Above Average” as the company increased its loan acquisitions from correspondents with delegated underwriting authority.
The rating agency said its assessment reflects the Strong collateral performance of Chase's prime jumbo residential mortgage loans, Above Average lending practices for prime jumbo residential mortgage loans, and Above Average operational stability.
However, three assessment components have declined since Moody’s last reviewed Chase. The rating agency lowered its view on Chase’s property valuation from Strong to Above Average and its underwriting policies and procedures from Above Average to Average. Moody’s noted that Chase acquired more than half of its loans from its correspondent channel which has delegated underwriting authority.
Additionally, Moody’s lowered its assessment of Chase’s technology from Strong to Above Average. The company’s new Mortgage Express LOS is not visually intuitive and lacks innovations seen in other systems, Moody’s said. Also, unlike technology typically used by other originators, Chase’s LOS uses a character user interface and not a graphical user interface.
Moody’s said financial stability, loan performance, and credit-risk management remain the company’s strongest features. The rating agency continued to assess Chase's financial stability as Strong based on the financial strength and stability of its parent company JPMorgan Chase & Co.
Additionally, Chase’s prime jumbo program had low early-payment defaults and repurchase requests during the 69-month period ending September 30, resulting in Moody’s Strong assessment of its early loan performance. The rating agency also continues to assess Chase's credit-risk management as Strong because of its sophisticated risk-management process and solid feedback mechanisms.
