JPMorgan’s Dimon threatens to quit FHA loans
Rules on penalties need to be clearer, CEO says
JPMorgan Chase’s (JPM) CEO says his bank is considering getting out of the FHA mortgage origination business altogether.
Notably, with the second quarter’s 66% year-over-year plunge in originations reported last week, that process is inadvertently and unintentionally under way.
CEO Jamie Dimon’s JPMorgan paid more than $600 million in federal fines for originating $200 million in flawed FHA loans, and now he and others in the industry want clearer rules spelling out when the government will demand these triple penalties, Bloomberg reports.
“The real question to me is, should we be in the FHA business at all?” Dimon said. “And we’re still struggling with that.”
Dimon’s threat to stop FHA lending may be meant to push regulators to address bankers’ frustrations over the stiff penalties they must pay, housing industry analysts say. Banks are under pressure to provide FHA mortgages -- despite the risk of damages for underwriting errors -- to help meet federal laws requiring them to serve minority and low-income borrowers. The standoff is hurting the tepid housing recovery as lenders tighten standards for FHA loans to avoid triggering the fines.
“My guess is that it’s probably gotten people’s attention that he signaled that maybe he’s had enough,” said Brian Montgomery, vice chairman of the Collingwood Group in Washington, who served as FHA commissioner under President George W. Bush. “I suspect that every one of his competitors feels the same.”