JPM’s Jamie Dimon: Blame #Regulation for American Dream Turning to #Housing Nightmare

Posted on in Housing, TV Appearances
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THE COLLINGWOOD GROUP NEWS BRIEFING

Everything YOU Need to Know to Stay Ahead of Your Competitors
April 17, 2017
The Taxman Cometh

Click here to listen to our favorire song about our least favorie subject: TAXES

Tomorrow is Tax Day in the U.S. and you need to pay Uncle Sam by Tuesday midnight, or file for an extension.

Hey, at least we got a slight break — this year’s deadline is a couple of days later than April 15, because the usual deadline fell on Easter weekend. You’ve been warned!

JPM’s Jamie Dimon: Blame Regulation for American Dream Turning to Housing Nightmare

Multitudes of would-be first-time homebuyers have been stymied in their pursuit of an iconic piece of the American dream in recent years.

JPMorgan top boss Jamie Dimon finds the whole thing unsettling.

JPMorgan had plenty to crow about during its first-quarter media call Thursday, in which the company beat earnings and reported some record numbers. But during the call, Dimon took the opportunity to air some concerns.

In an impassioned speech, he said there was dysfunction in the mortgage market that he thought had cut lending by up to $500 billion a year, boxing out many of the Americans who would benefit the most.

His comments were based on a March 31 report from JPMorgan’s fixed-income strategy team saying “under an early 2000s lending regime, another $500bn of new purchase loans could have been extended in 2016.”

“If that number is right, shame on us” for not doing something about it, Dimon said.

A primary culprit, in his eyes, has been government regulation in reaction to the financial crisis.

Dimon’s message echoes his letter to investors released in early April. In the letter, Dimon described homeownership as the “embodiment of the American Dream,” and he lamented a slow housing recovery, which he blames in part on mortgage credit restrictions.

He acknowledged that after the financial crisis his firm “needed to create a safer and better-functioning mortgage industry,” but he said the response was excessive and created new problems.

Dimon described the complex web of government oversight that dampened banks’ willingness to lend:

“Seven major federal regulators and a long list of state and local regulators have overlapping jurisdiction on mortgage laws and wrote a plethora of new rules and regulations appropriately focused on educating and protecting customers. While some of the rules are beneficial, many were hastily developed and layered upon existing rules without coordination or calibration as to the potential effects.

“The result is 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, Dimon said, has been more expensive mortgages for consumers and less access to people without a sterling credit history.

And in a not-so-subtle jab at pro-regulation pushers, Dimon notes that the people they’re trying to protect have lost the most from the industry’s heightened governmental scrutiny. He wrote:

“It’s noteworthy that those who lost access to mortgage credit are the very ones who so many people profess to want to help – e.g., lower income buyers, first-time homebuyers, the self-employed and individuals with prior defaults who deserve another chance.”

Read Jamie Dimon’s Full Letter here

Mortgage Banker Profits Increase

Independent mortgage bankers profits are up, according to the Annual Mortgage Bankers’ Association Performance Report. Independent mortgage banks and mortgage subsidiaries of chartered banks made an average of $157 more on average per loan originated in 2016 compared to 2015.

“Average production volume for companies in our Annual Performance Report rose in 2016, reflecting a larger industry trend of increasing volume in 2016 over 2015, based on MBA industry estimates,” said Marina Walsh, MBA VP of Industry Analysis. “Average loan balances also rose, reaching a study-high $244,945 for first mortgages in 2016,” Walsh continued. “This translated into higher revenues that reached a study-high $8,555 per loan in 2016.  Yet production expenses also reached a study-high, at $7,209 per loan, and offset a portion of these revenue improvements.  The net result was a slight increase in overall net production income.”

The report also found that average production volume was $2,679 million per company, another increase from 2016’s $2,504 million per company. The MBA estimates total production volume in 2016 to be $1.89 trillion, an increase from 2015’s 1.68 trillion.

The average production profit rose 6 basis points year-over-year. From 52 points in 2015 to 58 points in 2016. However, 2016 did see a slight drop within the year. Net production income averaged 61 basis points during the first half of 2016, but dropped to 55 in the second half of the year. The MBA reports that the purchase share of total originations by dollar volume dropped slightly in in 2016, from 64 percent in 2015 to 62 percent.

More firms posted pre-tax net financial profits in 2016 than 2015, up to 94 percent compared to 2015’s 92 percent. The MBA surveyed 280 firms, 76 percent of which were independent mortgage companies. The other 24 percent were mortgage subsidiaries and other non-depository institutions

Ben Carson Gets Stuck in Elevator While Touring Housing Project

Housing and Urban Development Secretary Ben Carson was rescued by firefighters from a stuck elevator while touring an affordable housing development in Miami on Wednesday morning.

The secretary was visiting the Courtside Family Apartments as part of a two-day listening tour in the area to learn about the challenges low-income people face finding affordable housing. The Miami Herald estimates Carson was trapped for about 20 minutes.

Alonzo Mourning, the famed former Miami Heat player, was waiting for Carson when he was released. Mourning partnered with Miami’s Housing Trust group to develop the complex in response to the need for more affordable housing in the area; it was funded through a public-private partnership. Michael Liu, the director of Miami-Dade County Public Housing, was also in the elevator.

read more: Chicago Tribune

Manafort May have Received Tax Break for Trump Tower Condo

President Trump’s former campaign chairman and a key player in the FBI probe of Russian election meddling appears to be getting an illegal property tax break on his Trump Tower luxury condo, the Daily News has learned.

Paul Manafort gets $5,000 trimmed off his annual tax bill under a city condo tax abatement program that’s only available to properties that are an owner’s primary residence. Manafort claims to the city that his exclusive Fifth Ave. aerie on the 43rd floor — 23 floors below Trump’s — is his primary residence. But he also claims that his Palm Beach, Fla., condo is his primary residence to get a big tax break down there known as a homestead exemption. Both New York and Florida have the same rule — you only get the tax break if the property is your primary residence.

read more: NY Daily News

Homes: Selling Like Hotcakes

Homes are flying off the shelves this spring, as demand rises and supply continues to drop.
Record high prices in some local markets are not thwarting hungry buyers, as they rush to take advantage of the lowest mortgage rates of the year.

Home sales jumped nearly 9 percent in March compared with March 2016, even as the number of homes for sale plunged 13 percent, according to a new report from Redfin, a national real estate firm.
That demand dynamic further increased competition in the market, resulting in the fastest average sales pace since Redfin began tracking in 2010. The typical home went under contract in just 49 days, down from 60 days a year ago.

Steep competition also pushed the median price of a home sold in March to $273,000, up 7.5 percent year over year.
“At some point consumer budgets will stagger behind the fast pace of price appreciation,” said Nela Richardson, Redfin’s chief economist. “The combination of low inventory, high prices and strong competition will continually challenge first-time buyers this year and they are the cornerstone of the housing market.”

Homebuilders are benefiting from the lack of supply of existing homes for sale. Mortgage applications to purchase a newly built home in March were up 6.7 percent compared with a year ago to the highest level since the Mortgage Bankers Association began tracking this metric in 2012.

“The pickup from a fairly modest February showing suggests that developers are finding ways to bring new product on line to help supplement otherwise low inventories of existing homes for sale in the U.S.,” wrote Lynn Fisher, MBA’s vice president of research and economics, in a monthly report.

The average loan application size for a newly built home was unchanged, which may indicate builders are trying to keep prices down in order to get more buyers in the door. The average loan size for existing homes reached the highest on record this month. This is a factor of both higher prices and a severe lack of inexpensive starter homes for sale.

In Washington, D.C., the median price of a home sold in March hit a new high for the month, as sales jumped 19 percent. Supply, however is still incredibly low. Half the homes sold in March were on the market for 12 days or less, according to the Greater Capital Area Association of Realtors.

In Charlotte, North Carolina, the story is much the same. The supply of homes for sale dropped 20 percent compared with March 2016, but sales rose 11.5 percent, according to The Charlotte Regional Realtor Association. It took 18 fewer days to sell a home compared with last year.

In Las Vegas, where foreclosures flooded the market less than a decade ago, home sales surged 15 percent compared with March 2016, and prices are now double what they were five years ago, according to the Greater Las Vegas Association of Realtors. This as the market has less than three months’ supply of homes for sale. Six months’ supply is considered a balanced market between buyer and seller.

read more: CNBC

Mortgage Rates Hit Lows for the Year

Freddie Mac reports the 30-year mortgage rate dropping for the fourth consecutive week and hitting a new low for 2017, last week.

• 30-year fixed-rate mortgage (FRM) averaged 4.08 percent with an average 0.5 point for the week ending April 13, 2017, down from last week when it averaged 4.10 percent. A year ago at this time, the 30-year FRM averaged 3.58 percent. 

• 15-year FRM this week averaged 3.34 percent with an average 0.5 point, down from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 2.86 percent. 

• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.18 percent this week with an average 0.4 point, down from last week when it averaged 3.19 percent. A year ago, the 5-year ARM averaged 2.84 percent.

“Following a weak March jobs report, the 10-year Treasury yield dropped about 5 basis points,” says Sean Becketti, chief economist, Freddie Mac. “The 30-year mortgage rate fell 2 basis points to 4.08 percent. Not only did the average 30-year fixed-rate mortgage decline for the fourth consecutive week in our survey, it also fell to a new 2017 low.”

Making a Living From Airbnb

New Yorkers who welcome strangers into their homes by becoming Airbnb hosts have found that the experience can be at turns nerve-racking, humorous and sometimes embarrassing. But for some determined hosts, it has proved profitable enough to replace more traditional revenue streams.

The first paying guest Evelyn Badia invited into her home was Ted, a professor from Amsterdam. Ted was a coffee drinker, but Evelyn didn’t own a coffee maker. “My first mistake as a host,” Ms. Badia said. “I don’t drink coffee. Why would I get a coffee maker?” She promptly went out and bought one.

Ted, it turned out, didn’t mind the oversight. When he traveled again to New York a few months later, this time with his wife, the couple stayed with Ms. Badia, whose guests have given her a five-star rating. “As an Airbnb host you have to remember, it’s not about you, it’s about them.”

Airbnb, the short-term home rental service that began operations eight years ago and is now valued at $31 billion, estimates that there are 46,000 hosts statewide, with more than 45,000 active listings in New York City alone, generating hundreds of millions of dollars in rental income every year. (Inside Airbnb, an independent data-tracking website, estimates the number of hosts in the city to be about 36,888.)

While the debate continues over how Airbnb might affect housing availability and rental prices in the city, the incentive to host is clear. Why rent out the average New York one-bedroom for $2,700 a month when there is potential to make $200 every night, or $6,000 a month, during peak tourist seasons? Some housing advocates believe that if transient rentals like those on Airbnb were no longer available, the available long-term rental housing stock could be as much as 10 percent higher citywide.

read more: NY Times

L.A.’s Housing Costs Make it Harder to Keep Workers

With year-round sunshine, golden beaches and some of the country’s best tacos and burritos, you might think Los Angeles wouldn’t have a problem attracting and retaining workers.

But like many metropolitan areas burdened with high housing costs, the region’s affordability crisis is deterring workers from putting down roots, according to the results of a survey released this week by USC and the Los Angeles Business Council.

“Though we have yet to see a critical mass of businesses priced out of the region, this is an area of concern,” Raphael Bostic, a professor of public policy at USC who led the research, said in a statement.

According to Bostic, high housing costs are leading to employers’ having to develop special hiring packages, subsidize employee transportation or offer relocation costs, which puts a strain on companies’ bottom lines and makes it harder to compete with markets where housing costs aren’t as high.

read more: LA Times

 

Week Ahead

Today

Boston Marathon — good luck to all the runners on this Patriots’ Day.

Tomorrow

Housing Starts 8:30 a.m. ET

Freddie Mac Webinar: Learn About the New Servicer Success Scorecard 1:30 p.m. ET

Wednesday

MBA Mortage Applications 7 a.m. ET

Thursday

Freddie Mac Weekly Mortgage Survey 10 a.m. ET

Have a prosperous day and week ahead!

 

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Lou Giserman

Senior Media Consultant

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