When Banks Don’t Want to Make Loans, Part 1: JP Morgan Chase, 2009

I have new data on lending by JP Morgan Chase from last year.  Even at first glance, the numbers show how hard it has been to get a home mortgage loan.

Chase received more than 469,000 loan applications in 2009. They turned down more than 36 percent of those loans. That is much higher than in recent years. That is the big picture. Cutting their lending into smaller pieces shows where they were willing to offer capital, and where they were not.

• Not all loan guarantees were the same. For example, less than one of every four USDA and VA-back home purchase loans were denied, but more than 31 percent of home purchase FHA mortgages were denied.
• It was virtually impossible to get a loan to fix up your house.  Chase turned down 68 percent of rehab loans. It was even harder for African-Americans. Chase approved a conventional home rehab loan to only 1 in 10 African-Americans (10.7 percent).
• It was a market for refinancing: Chase had more than 267,000 applications for refinances and slightly more than 73,000 applications for home purchases.  Those applications resulted in about 118,000 refinances but only 25,760 home purchase loan originations.

To me, the most disturbing number is the sum of home purchase approvals. For one of the nation’s second largest bank to only make 25,000 home purchase loans is shocking. In 2006, JP Morgan Chase Bank made, by itself, more than 154,000 home purchase loans.  Chase Manhattan Bank, one of its subsidiaries, made another 19,101 home purchase loan originations.

JP Morgan Chase’s annual meeting is scheduled for May 18th in New York. Any shareholder can attend the meeting.