JPMorgan Chase and Wells Fargo, the nation’s largest mortgage lenders, said Friday they won’t make home loans much cheaper for consumers, even as they reported booming profits from that business.
Those bottom lines have been padded by federal initiatives to stimulate the economy. The Federal Reserve is spending $40 billion a month to reduce mortgage rates to encourage Americans to buy homes. Instead, its policies may be generating more benefits for banks than borrowers.
[Wells Fargo spokesman]:
“We don’t run the business based upon share; we run the business based on profitability.”
At JPMorgan, chief financial officer Doug Braunstein largely echoed those sentiments: “We’re not going to price a lot lower to create demand. . . . These are competitive businesses, and we have to compete.”
Banks have said they are overwhelmed with demand now, giving them little reason to lower rates further. Eventually, that volume will thin out, however, researchers at the Mortgage Bankers Association said.
Banking executives at Wells Fargo and JPMorgan said a future decline in demand may still not prompt them to lower rates to gain more customers. One official added that he even expects mortgage rates to rise next year.
Nothing wrong with a healthy, strong banking system: it’s a huge part of our economy and in Greenwich, record profits for banks means continued demand for houses. Great. But $40 billion a month of taxpayers’ money being diverted to create those profits with no effect on the ostensible purpose of that spending: lower mortgage rates to revive the housing market, makes me wonder whether there’s some other reason for such largess that has nothing to do with homeowners. Nah, surely it’s just another example of misguided federal spending, right?