JPM’s Dimon: A "Turn" in Housing May Be Closer

JPMorgan Chase chairman and chief executive Jamie Dimon suspects a “turn” in the housing market is getting closer but a recovery may still be years away.

The shadow inventory of potential defaults and foreclosures, while still high, is “going down, not up,” he said during a conference call Friday morning, discussing the bank’s fourth quarter financial results.

Over the past two years JPM’s mortgage division, Chase, has added 15,000 to 20,000 employees to deal with default servicing and REO. “That number has probably peaked and I think you will see it coming down in a couple of years,” the CEO told analysts and investors.

Dimon stressed that an improving jobs picture will lead to higher household formation, adding that in some markets it’s now cheaper to buy a home than to rent.  In addition, he expects lenders will loosen their mortgage underwriting standards. “Put all those things together, and you are going to have a turn at some point.  I don’t know if it’s three months, six months or nine months,” he said, “but it’s getting closer.” 

JPM expects to realize losses of $350 million per quarter this year on buybacks – mostly on Fannie Mae and Freddie Mac loans. (See related story on the NMN website.)

“More likely than not, we have excess reserves that we will be reversing when the economy gets stronger,” Dimon said.  “But not until charge-offs and delinquencies come down.”

Meanwhile, the major servicing banks, including Chase, are close to a settlement with the state attorneys general and Department of Justice over the robosigning/foreclosure scandal. Dimon noted that a settlement is “still imminent,” but “there are still open issues.”

He wants to get it resolved soon.  “It would be good for the mortgage markets to move on,” Dimon said.

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