#MortgageFinance | Explore Tumblr Posts and Blogs

topinforma · 7 years

Text

New Post has been published on Mortgage News

New Post has been published on http://bit.ly/2pkVcKB

RPT-JPMorgan tries TV stars, political muscle to regain mortgage ... - Reuters

(Repeats story first published on Friday)

By David Henry

NEW YORK, April 14 After having to stomach $31billion worth of bitter mortgage settlements with governmentagencies a few years ago, JPMorgan Chase & Co swore offa huge swath of the home loan market.

Gone were borrowers with anything much less than pristinecredit ratings. The cost of managing delinquent accounts and thethreat of huge legal penalties were written off as not worth therisk. Better instead to focus on wealthier customers who wantedjumbo-sized loans that are beyond the reach of governmenthousing finance agencies.

But there was a problem: Chase was leaving behind many ofits mass market customers who were going to competitors for theconventional and government-guaranteed loans they wanted.

Now, the bank’s management team, led by Chief ExecutiveJamie Dimon, is working fiercely to change course – hoping tonot only bring back customers, but influence what could be areshaping of U.S. mortgage finance policy for the first time ina generation.

Customers will soon start seeing signs of this effort. Nextmonth, Chase plans to launch advertising featuring Drew andJonathan Scott, stars of the popular reality “Property Brothers”shows. In addition to TV spots, the campaign will featurecardboard cutouts of the telegenic twins in Chase branches.

Chase is also in the process of boosting its mortgagelending force by 10 percent, upgrading its loan-making softwareand jazzing up its smartphone app with more mortgage accounttools.

At the moment, fewer than one in 10 Chase customers withhome loans got them directly from Chase, a situation consumerbanking chief Gordon Smith recently described as “terrible.”

“It is time to go after the opportunity we have with our owncustomers,” Mike Weinbach, the bank’s mortgage chief, said in arecent interview with Reuters.

JPMorgan Chase is not the only major bank that is restlessafter having stepped back from the U.S. mortgage market in theaftermath of the housing crisis last decade. At Bank of AmericaCorp, executives say they are no more content with fewerthan two in 10 of their customers with mortgage loans havingborrowed from their bank.

Mortgage companies such as Quicken, Caliber andloanDepot.com scooped up much of the business from batteredbanks. (tmsnrt.rs/2orqDzB)

JPMorgan’s $31 billion cost of 13 mortgage-related legalsettlements was second only to Bank of America’s $71 billion,according to data collected by bank analysts at Keefe, Bruyette& Woods.

Still, JPMorgan’s mortgage retreat stands out because thebank has used its scale and financial strength to gobble upmarket share in many other businesses, from credit cards anddeposit-taking to commercial lending and Wall Street banking.

In backing away, JPMorgan saw its market share ofconventional mortgages that are small enough to be resold togovernment-sponsored enterprises (GSEs) Fannie Mae and FreddieMac fall by half, according to data from Inside MortgageFinance.

Its share of all mortgage loans made directly by lendersfell to 2.8 percent last year from 12.6 percent in 2011.Logically, it should be close to Chase’s 8.3 percent of share ofretail deposits, said Guy Cecala, CEO of Inside MortgageFinance.

JUMBO MISSES

Chase opted to go after better-off borrowers who took outso-called jumbo loans in excess of the Fannie and Freddie limit,which then was $417,000 in most parts of the United States. Lastyear, jumbos were 49 percent of all loans Chase made, up from 14percent in 2013.But jumbos account for only 18 percent of U.S. mortgages. Byturning from bigger parts of the market, JPMorgan was hurtingits wider consumer franchise.

That could be costly if it persists. Customers without Chasemortgages are twice as likely to leave as those who have themfrom the bank, Weinbach said. And, checking and savings accountcustomers who get their home loans from Chase tend to add totheir deposits.

Management’s effort to swing back may already be bearingsome fruit. JPMorgan said on Thursday that it made $9 billion ofhome loans directly to customers in the first quarter, 3 percentmore than in the same period a year earlier.

Chase’s shift comes amid crosscurrents in the mortgagemarket. The latest wave of loans for refinancing is abating asinterest rates rise. That has reduced revenue across theindustry.

But bank executives also see other conditions improving.Federal housing agencies have been loosening policies to helpmiddle America get access to more credit. The millennialgeneration has also begun reaching the nesting age, leading to anew crop of home buyers.

The GSEs have already adjusted some rules to be lessfinancially threatening to lenders. For instance, they dropped ademand that banks take back loans that default after three yearsunless there has been fraud.

Dimon sees a chance to get more relief from the government.This month he used four pages of his annual letter toshareholders to outline more changes he wants to see. Heexpressed particular concern about a bank’s costs and liabilitywhen loans it underwrites default.

Current rules have made lenders so cautious that they havenot funded an additional $300 billion to $500 billion of loansfor home purchases in each of the last five years, JPMorgananalysts estimate. The cost to the economy, they believe, hasbeen one third of a percentage point of annual growth.

“If that number is right, shame on us,” Dimon told reporterson the bank’s post-earnings conference call on Thursday. “Weshould have done something about that. And, it can be done veryquickly.”

(Reporting by David Henry in New York; Editing by Bill Rigby)

0 notes