Dimon Unveils Top Priorities for Regulatory Relief

April 5, 2017 at 8:38 am Leave a comment

JP Morgan Chase’s CEO Jaime Dimon used his first annual letter to shareholders since Donald Trump took office to outline a series of regulatory reforms he says will make more home loans available for first time home buyers and those with less than pristine credit. 

Intriguingly, two of the proposals I like could be accomplished without legislation assuming that a more free-market oriented Director of the CFPB will eventually be taking the reins.  According to Dimon, post-banking crisis regulatory reforms have resulted in a “complex, highly risky and unpredictable operating environment that exposes lenders and servicers to disproportionate legal liability and materially increases operational risks and costs.”  The result:  more expensive mortgages and fewer mortgage loans for those without strong credit.

While his description of the ailment didn’t surprise me, his cure did.  He wants to see greater use of FHA mortgages as a means of providing credit for first time and moderate income home buyers.  But this should be coupled with re-examination of government litigation seeking to make mortgage lenders repurchase mortgages that allegedly don’t meet FHA standards.  Specifically, he is calling on the FHA to publicly commit to using the False Claims Act to sue lenders solely for intentional fraud rather than immaterial or unintentional errors. 

A second change urged by Dimon would be for the GSEs, Treasury Department and the CFPB to work toward creating a single national regulatory framework for mortgage servicing.   He points out that, as of 2015, it costs on average more than $2,000 a year to service a mortgage in default and that the cost of servicing a performing mortgage is $181, annually.  A uniform system with uniform rules would go a long way to keeping costs from continuing to sky-rocket.  The problem with this approach is that, for it to be truly effective, Congress would have to pass laws strengthening federal pre-emption of state lending law or states like New York would have to voluntarily agree to go along with these standards.  Both of these scenarios are highly unlikely.   

Entry filed under: General, Mortgage Lending, Regulatory. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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