The U.S. “desperately” needs to reform its mortgage industry, according to Jamie Dimon, CEO of massive investment bank and mortgage lender JPMorgan Chase, and doing so would be a major boon to both would-be homebuyers and the broader economy.
Dimon laid out his case for mortgage reform in a newly posted letter to company shareholders, pointing to “onerous and unnecessary origination and servicing requirements.”
These requirements are driving banks away from “significant parts” of the mortgage industry, Dimon argued, and have prevented more than $1 trillion in loans that might otherwise have been made over the last five years.
“Today, bad mortgage rules are hindering the healthy growth of the U.S. economy,” Dimon said in the letter. “Because there are so many regulators involved in crafting the new rules, coupled with political intervention that isn’t always helpful, it is hard to achieve the much-needed mortgage reform.”
Perhaps sensing that calls to loosen lending regulations could elicit memories of the financial crisis a decade ago, Dimon clarified in his letter that he isn’t calling for subprime loans. Rather, he wants to see more of the “mortgages that we should be making.”
This week’s letter isn’t the first time Dimon has called for mortgage reform, with similar points coming up in his comments last year, in 2017 and in 2016. The calls for reform also come amid a larger industry reckoning over how to modernize various parts of the lending industry. The National Association of Realtors, for example, has called for changes to, or replacements for, Fannie Mae and Freddie Mac in order to maintain long-term stability in the mortgage market.
For Dimon’s part, he also sees “onerous” lending requirements as just one of multiple things getting in the way of new loans. In his new letter, he points out for example that student loan debt is slowing homeownership rates and “starting to affect the economy.”
Dimon doesn’t wade deeply into specific changes that he’d like to see in the mortgage industry, but in his new letter does point to his company’s new digital mortgage fulfillment process — which he says allows closings within three weeks — as a bright spot.
He also calls for the “opening up the securitization markets for safe loans.”
If reforms do happen, Dimon believes they could “dramatically improve the cost and availability of mortgages to consumers – particularly the young, the self-employed and those with prior defaults.” He also believes the economy could grow” by up to 0.2 percent a year” thanks to reforms.
“The country desperately needs mortgage reform,” Dimon ultimately concludes in the letter. “It would add to America’s economic growth.”