By Michelle F. Davis | Bloomberg
JPMorgan Chase & Co. is going on the “offensive” in mortgages as home prices rise across the country, said Marianne Lake, the bank’s chief executive officer for consumer lending.
“In the case of home lending in particular, we’ve walked back some of our constraints in a reflection of the fact that we’ve seen home prices continue to improve,” Lake said at a virtual investor conference Monday. “We have loosened some of our criteria there,” she said, without elaborating.
Low-interest rates and a “generally solid economy” are fueling a surge in refinancing activity and propelling the purchase market, which is estimated at about $1.3 trillion this year, Lake said, adding that homeownership rates are up about 4% from last year, and up 5% among customers between the ages of 35 and 44, many of whom may be migrating away from denser urban centers amid the coronavirus pandemic.
“Just to put that in context, in terms of the purchase market, that would be similar in size to the housing boom back in 2005 and 2006,” Lake said. “There’s no question that the last decade has been a quite challenging decade for home lending for the industry, and we were not an exception. A lot of that is in the rear-view mirror. I feel like we’re more on the offensive than the defensive.”
Lake, who’s overseen all of consumer lending for about 18 months, has been imparting a simple strategy to middle managers: Cut costs and sell more mortgages to “core” customers who already have a primary banking relationship with the bank. JPMorgan has lowered headcount and sought to automate and digitize its home-loan business to appeal to more borrowers.
Profitable business
Signs of a turnaround in home-loan originations were showing even before the pandemic hit, with the part of JPMorgan’s retail business that offers mortgages to consumers — either when they walk into a branch, or when they call or apply online — becoming profitable in the first month of the year for the first January in five years, Bloomberg reported in February.
JPMorgan had $1.71 billion in revenue from its home-lending business in the third quarter, up 17% from a year earlier. Firmwide, origination volume rose 23% this year through September, to $96.4 billion.
With coronavirus cases rising globally and questions about the path of the economic recovery, Lake said the bank is closely monitoring the environment. JPMorgan executives will be keeping an eye on whether the pandemic continues to compel younger customers to flee crowded urban centers for areas where homes offer more space to work from home.
“We are seeing that that younger cohort of customers is possibly the customer that is looking to migrate away from the more dense urban centers to less dense centers –particularly we’re seeing that in Manhattan,” Lake said. “I suspect we will see more of that. It’s a bit of a watch item rather than a reality.”
Source: Orange County Register
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