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The Future of Mortgage Reform

In the annual letter to shareholders, JPMorgan Chase CEO Jamie Dimon stated that the U.S. is in desperate need of mortgage reform. Dimon stated that reform would add to America’s economic growth.

“Reducing onerous and unnecessary origination and servicing requirements (there are 3,000 federal and state requirements today) and opening up the securitization markets for safe loans would dramatically improve the cost and availability of mortgages to consumers – particularly the young, the self-employed and those with prior defaults,” said Dimon.

“And these would not be subprime mortgages but mortgages that we should be making,” Dimon continued. “By taking this step, our economists believe that homeownership and economic growth would increase by up to 0.2 percent a year.”

According to Dimon, it was mortgage laws that led to the Great Recession in 2008, and today, bad mortgage laws are hindering economic growth.

“Because there are so many regulators involved in crafting the new rules, coupled with political intervention that isn’t always helpful, it is hard to achieve the much-needed mortgage reform,” said Dimon. “This has become a critical issue and one reason why banks have been moving away from significant parts of the mortgage business. That business, in particular, highlights one of the flaws of our complicated capital allocation regime.”

Dimon stresses the importance of mortgage reform. According to Dimon and JPMorgan Chase’s analysis, over “$1 trillion in additional mortgage loans might have been made over a five-year period had we reformed our mortgage system.”

Additionally, in his letter, Dimon notes the impact student loans have had on mortgages and household formation.

“Irrational student lending, soaring college costs and the burden of student loans have become a significant issue,” said Dimon. “The impact of student debt is now affecting mortgage credit and household formation – a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8 percent. Recent research shows that the burdens of student debt are now starting to affect the economy.”

Find Dimon’s complete letter here.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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