Clearly Dimon no longer sees mortgage lending as a particularly lucrative business, which is ironic, given that today's strict underwriting standards have produced the best, safest new crop of mortgages in quite a while. What he's referring to with the rules are risk retention rules and securitization rules that are still being negotiated. These rules could make it less lucrative for banks to originate and own mortgages because they could mandate holding on to 5 percent of the risk of certain loans. They could also make it even tougher for more Americans to obtain loans or to refinance, which would shrink the overall business.
Beyond new rules, though, perhaps Dimon doesn't predict the investor return to the mortgage market upon which so many federal regulators and politicians are depending. As lawmakers debate how to dismantle Fannie Mae and Freddie Mac, the underlying assumption is that the two can easily be replaced by a robust investor market. That market will only return if investors believe that mortgages will once again be a good bet. That's where the MBA study comes in.
The MBA researchers say that demographics, regardless of the recent housing boom, favored a drop in home ownership.
"Between 2000 and 2009 there was a one percentage point increase in the homeownership rate. But, were it not for the shifts in access to homeownership through easier credit and the changes in socioeconomic conditions, the homeownership rate would have actually fallen between 2000 and 2005, rather than increasing," researchers wrote.
This is due to changes in the population's socio-demographic composition and economic attributes. They found that the increase in the homeownership rate during the housing boom was most pronounced among those under the age of thirty; they were the most willing to take on the excess risk of the dicey mortgage products. They did not, however, have the economic standing to back it. So what now?