Executives at the largest banks are urging the Trump administration to simplify the rules around getting a mortgage, arguing that streamlining paperwork and compliance could lower costs and spur more lending activity amid a weak housing market.
“I've been talking about it for years that they should focus on reducing requirements,” Jamie Dimon, chief executive officer at JPMorgan Chase, said during the bank’s third-quarter earnings call on Tuesday.
“We think you reduce the cost of mortgages 30 to 40 basis points overall without creating any additional risk,” Dimon said. “There is just excessive stuff put in place after the great financial crisis, which obviously demanded a response — but it's excessive. Anyone taking out a mortgage will tell you they had to sign 17 forms, 17 documents and all these things.”
That call for reform comes as JPMorgan’s mortgage volume ticked up to $16.9 billion in the third quarter ending Sept. 30, up from the $16.3 billion reported in the previous quarter. Home lending from the bank’s retail channel also rose to $13.9 billion from $13.5 billion.
Bank of America's chief executive officer, Brian Moynihan, echoed the strength in consumer lending during the company’s third-quarter earnings call on Wednesday, noting that “card, home and auto loan balances grew year-over-year, reflecting healthy consumer demand.” The executive added, “We believe those further cement the relationship beyond just the operating account alone.”
At Bank of America, home lending stood at $262 billion in the third quarter, up from the previous quarter.
Wells Fargo’s chief executive officer, Charles Scharf, acknowledged the challenges facing the bank’s consumer businesses on Tuesday, telling investors, “Our consumer businesses are currently generating returns below the industry. We've made good progress on transforming and simplifying our home lending business and the remaining actions should generate a higher return business than we see today.”
Wells Fargo originated $7 billion in new mortgage loans in the third quarter, down from $7.4 billion in the previous quarter.
Still, the broader housing market remains under pressure.
Data from the National Association of Realtors showed existing home sales are on track for the worst year since 1995 — for the third year in a row. The average rate on the 30-year fixed mortgage was 6.3% as of the week ending Oct. 9, marking the first decrease since September.
Modern rules for banks
Banks have been pushing for a scaled-back version of the “Basel Endgame” capital rule, a 2008 requirement that mandates financial institutions hold significantly more capital. Executives at the banks have argued that higher capital requirements make it harder to offer mortgages, car loans, credit cards and small business loans.
Treasury Secretary Scott Bessent said at the Federal Reserve’s community bank conference last week that the administration is working to change these rules so that banks wouldn't need as much in reserve.
“This will likely entail reduced capital requirements for large banks on mortgage loans, investment-grade corporate loans, and some other important exposures. We must therefore ensure parity by giving smaller banks at least the option to benefit from those reduced requirements,” Bessent said.
Citigroup’s CEO, Jane Fraser, responded positively to these changes. She told investors this week that she was glad to see more clarity around the new rules, including Basel III — the international standards that decide how much money banks need to keep on hand.
“We’re very happy to see a lot of the proposals getting more clarity. We would expect to see Basel III ... with much more clarity in the first quarter. So, that will be good timing for being able to lay out what that means for [our plans]," Fraser said.