Will JPMorgan settlement will hurt efforts to privatize mortgage market?

by Ryan Smith25 Nov 2013
The terms of JPMorgan Chase’s record $13bn mortgage-bond settlement with the government will undermine Washington’s efforts to move mortgage-market risk from taxpayers to private capital, according to the world’s largest money manager.

BlackRock, Inc., has criticized the settlement as unfair to investors, according to a Bloomberg report. That unfairness, says BlackRock, will cause investors to shy away from pumping capital into the mortgage market.

“Washington has a public policy goal of reducing the role that the government plays in the housing-finance market, and at the same time we now have a series of settlements where no investors were at the table and where money toward the settlements may come from investors’ pockets,” BlackRock Vice Chair Barbara Novick told Bloomberg. “It discourages the allocation of private capital to mortgage credit."

Under the terms of the settlement, JPMorgan admitted that it misled investors about the quality of its mortgage-backed securities. The lending giant also must allocate billions of dollars to helping underwater homeowners, writing down loan values and lowering monthly payments – a requirement which finance analytics firm Graham Fisher & Co. analyst Joshua Rosner pounced on.

“These were claims about investments where investors were misled,” Rosner told Bloomberg. “Why is money going to consumers?”

Justice Department spokesperson Adora Andy Jenkins told Bloomberg that JPMorgan would only give underwater homeowners loan modifications “if they are in the best interest of the investor and in accordance with the bank’s agreements with the investors. So when these modifications are made, it’s because they’re good for investors, consumers and neighborhoods across the country that are still recovering from the financial crisis.”

But Novick wasn’t buying. “That’s hard for us as investors to measure,” she said. “We don’t get enough transparency into what’s going on.”


  • by Bayview Mortgage, Inc | 11/25/2013 8:38:29 AM

    This settlement will have the oposite effect. The large lenders are going to quit using freddie and fannie so as to not have anyone looking over their shoulder. They have enough cash. This was just a slap on the wrists anyways. When you are talking about a trillion dollars worth of mortgages. The big Banks waiste so much many. This fine will never be missed. The Banks are like the Crack -Hos of the mortgage industry. And Dimon is the king pin of them all. Freddie and Fannie will be dissolved within two years.

  • by Bob Gillespie | 11/25/2013 8:48:25 AM

    BLACKROCK!!!! You want some Cheese with that Whine?? Take a small portion of the billions you made on the CDO's and other debt swaps that GUARANTEED you couldn't lose even if 100% of the mortgages defaulted, and SHUT THE F... UP!!!!

  • by Paul | 11/25/2013 8:53:46 AM

    "Transparency" Well it shouldn't be too foggy a notion that the government realizes it has screwed the pooch once too often in all matters banking & mortgage, so they'd like to pass future potential liabilities into the private sector.

    Had the government made some seriously transparent efforts to enforce mortgage underwriting and insuring guidelines in place the taxpayers may not have had to bail out banks.

    In these belated histrionic, barely transparent efforts of penalizing long-standing offenders who probably only got greedier serving the will of congress, should anyone be surprised that the private financing sector isn't too interested in playing the game?

    Legislators like Barney Frank and Maxine Waters can't serve up or speak out about a steady diet of carrots/legislation and forget the consequence of too much buttery toppings... the big lenders saw how to spice up the carrot and dodge the stick.

    Now that the government stick has gotten in a few licks, BofA needs a few more over the head to understand that they too are culpable, who in their right mind would sit back up to the table???


Should CFPB have more supervision over credit agencies?