As interest rates climbed sharply in the past two months, mortgage applications dropped. It's only the latest turn in what has been a wild ride for housing for many years.
To find out more about where the industry is heading, and what that means for the Columbus area, The Dispatch spoke last week with Kevin Watters, chief executive of mortgage banking for JPMorgan Chase, based in New York, and Eric Schuppenhauer, senior vice president and originations executive for mortgage banking at JPMorgan Chase, based in Columbus.
Q: Chase employs about 20,000 central Ohio workers, over 5,000 of them in the mortgage area. Do you anticipate any changes in your local staffing on the mortgage side?
Watters: The relative number will stay the same. You may have some ins and outs on the types of jobs, given the fluctuation in the market. As interest rates have gone up 100 basis points since the beginning of May, refinances have come down, so we will probably have less folks focused on refinances here and more folks on the purchase and servicing business.
Q: Where do you see mortgage rates going and what is it going to mean to housing?
Watters: We think rates can only go up, long term. ... I think you're going to have a little bit of volatility in interest rates as people try to react to the Federal Reserve ... and that's going to cause rates to rise, especially as you get to the back half of this year and the beginning of '1 4.
Q: How many people are out there who have not been able to refinance because they don't have the equity?
Schuppenhauer: There's still about 5 million people who could refinance in the U.S. ... So with these rates going up, they should actually make that decision finally to get into that lower rate.
Q: I've noticed Chase's "My New Home" campaign. What is Chase doing to attract customers as rates become more challenged?
Watters: We've had more than 250,000 people download the My New Home app so far. ... The app allows consumers to look for a house directly on his or her phone, plug in their estimated down payment, for example, so they can see what their monthly mortgage payment's going to be. They can get a real-time price estimate right there on the phone. And they can also, right through their phone, hit a button and call their local mortgage banker.
Q: Where do you see the next wave of mortgage retailing going for banks?
Watters: We think it's a great opportunity for the industry to partner with the Consumer Finance Protection Bureau to really help consumers by simplifying the mortgage process. Right now, so much of the paperwork that was designed to protect consumers actually hinders the mortgage process, so we've been actively looking to see -- how do you simplify the mortgage process, get a lot of the paperwork out while still providing the customer with all the information they need in a clear and transparent way?
Q: Is there anything Chase is doing to help that process?
Watters: We have a new mortgage-origination process that we're piloting right now, in fact right here in Columbus, for customers where we'll send you a lot of the stuff electronically, so these are documents you can e-sign. Through this pilot, over 80 percent of folks elect to take things electronically and then we can send and receive information back and forth over the Web and you can go out onto the website and see the documents we still need from you and really track your whole progress step-by-step.
Q: Do you think the mechanisms are in place to avoid a repeat of the financial crisis?
Watters: I think the way you avoid that is by continuing to get the right level of documentation (from borrowers). ... We just have to make sure as the mortgage origination market shrinks, financial institutions don't stop practicing quality underwriting standards to try to gain market share in a shrinking market.
Q: When will we work through the backlog of troubled loans, and what is Chase doing to facilitate that?
Watters: Our modification inventory is down significantly, our number of delinquent borrowers is down significantly. Credit has gotten a lot better, so we have a lot of work we do with loan modifications.
Q: What has Chase done to streamline the process for troubled borrowers?
Schuppenhauer: As soon as you say 'I am in trouble and I need help,' we assign somebody who is your single point of contact. ... Anyone, a customer or noncustomer, can also look at videos on our website, how to go through the process. (Videos can be found under My New Home Chase on YouTube.)
Q: In five years, what changes do you think we'll see in the mortgage industry?
Watters: You'll see the market size continue to go down for the next year or two. As refinance volumes come down, it will take a little while for the purchase business to catch up to that. If you were to look at the market in the last 12 to 18 months, it's been roughly 70 percent refinance and 30 percent purchase, so as refinances come down you're going to have a couple years until purchases start to overtake refinances. Given that, I think you'll see some of the smaller players who came up as refinance-only shops struggle the next few years.
Q: Are there new mortgage products on the horizon that consumers should expect?
Watters: At least with JPMorgan Chase, I think you'll see product simplification versus new products. If you think of some of the things where consumers got into trouble or financial institutions got into trouble during the criticism, it was creative products like option ARMs. ... That's not an industry or part of the business we're interested in being part of.
Schuppenhauer: The one thing we're seeing now is people wanting to pay off faster, so they will actually go to that 15-year mortgage even though they're paying a little more per month, so the whole consumer psyche around being in mortgage debt has changed. ... We think that's actually a good thing.
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