According to Kate Berry of American Banker, JPMorgan Chase has nearly stopped making home loans insured by the Federal Housing Administration.
Most large banks have curtailed FHA-backed loans in the past two years because of concerns about credit and legal risks, and JPMorgan’s 98% drop-off in that period puts an exclamation mark on the trend.
The $1.8 trillion-asset bank’s FHA market share was a mere 0.2% at June 30, compared with 12.2% just two years earlier, according to government data crunched by the American Enterprise Institute’s International Center on Housing Risk.
The rollback among big banks follows harsh penalties meted out by the Justice Department, which accused many banks of putting FHA on the hook for shoddy loans in the years leading up to the mortgage meltdown. Market shares at BB&T, Bank of America, Fifth Third Bancorp, Flagstar Bank, M&T Bank, Regions Financial and Wells Fargo have all declined in the past two years, the data shows.
Nonbanks have stepped into the void, and that shift is not expected to reverse until bank executives feel more comfortable with the credit profiles of many FHA borrowers and determine the odds of further federal prosecutions have fallen.
Nowhere is that reality clearer than at JPMorgan Chase.
Chairman and Chief Executive Jamie Dimon warned last year that the risks of FHA lending were just too great.
“The real question for me is should we be in the FHA business at all,” Dimon said on a conference call with analysts in July 2014. “Until they come up with a safe harbor or something, we are going to be very, very cautious in that line of business.”
He meant it.
In the second quarter, JPMorgan Chase originated just 340 FHA loans, compared with 19,111 FHA loans in the second quarter of 2013. Meanwhile, the bank’s overall home lending business is booming. JPMorgan originated $29.3 billion of home loans in the second quarter, up 74% from a year earlier.
According to the AEI, JP Morgan Chase has all but gotten out of the FHA market. Leaving Wells Fargo and US Bank as the big dogs in the FHA space.
But never fear! JPMorgan is financing Los Angeles mansions starting at $115 million.
With home prices over twice as fast as average wages, the FHA has troubles. right here in Potomac City.