JPMorgan steps back from mortgages

by Ryan Smith16 Jul 2014
One of the nation’s largest mortgage lenders is stepping back from making home loans to less creditworthy borrowers.

JPMorgan Chase has lost confidence it can recover much money from foreclosing on homes, even when the mortgages are backed by government guarantees, according to a Reuters report.

“The cost to take a customer through the foreclosure process is just astronomical now,” Kevin Watters, JPMorgan’ head of residential mortgage banking, told Reuters.

Watters said new federal and state regulations make it harder for banks to recover losses. According to housing analytics firm RealtyTrac, it took an average of 572 days to foreclose on a home in the first quarter of 2014. That’s up from just 120 days in the beginning of 2007, Reuters reported.

One area from which JPMorgan is already retreating is loans backed by the Federal Housing Administration, according to Reuters. The FHA guarantees those loans against default, but it has maintained that some loans made by JPMorgan and other big banks didn’t qualify for insurance.

JPMorgan CEO Jamie Dimon told investors Tuesday that he was frustrated that the bank settled with the FHA in February over claims that the bank had been getting FHA insurance payments on loans that weren’t eligible for coverage.

“The real question to me is, should we be in the FHA business at all?” Dimon said. “And we are still struggling with that.”

Meanwhile, nonbank lenders are lowering credit standards. In March, Carrington Mortgage Services lowered its minimum credit requirement to a FICO score of 550 and expanded its guidelines on several FHA, VA and USDA loan programs.

“We’re committed to the origination space, and it’s shrinking. Lenders such as Carrington need to differentiate themselves,” Ray Brousseau, Carrington’s executive vice president of mortgage lending, told MPA. “…Volumes are shrinking, and it’s going to be tougher to compete for that small amount of the pie. We found that going after that underserved market differentiates us from others, in part because our history and our DNA equips us to do it.”



Is TILA-RESPA a good or bad thing long term?