Shahien Nasiripour, Huffington Post
With millions of homeowners losing their homes to foreclosure during this recession, megabank JPMorgan Chase plans to argue against the Obama administration’s latest weapon in its fight to stem the problem — principal cuts for struggling borrowers — by citing the sanctity of contracts and the borrower’s “promise to repay.”
In testimony to be delivered Tuesday afternoon, David Lowman, chief executive officer for home lending at the “Too Big To Fail” behemoth, will fight back against the program which calls for lenders and investors to decrease the outstanding debt owed on a home mortgage. While his competitors at Bank of America, Wells Fargo and Citigroup plan to dance around the issue — judging from their prepared remarks — Lowman cut right to it: borrowers don’t deserve it.
“Like all loans, mortgage contracts are based on a promise to repay money borrowed,” Lowman’s prepared remarks read. “Importantly, there is no provision in the mortgage contract, express or implied, that the lender will restore equity or reduce the repayment amount if the value of the collateral — be it a home, a car or a stock market investment — depreciates.
“If we re-write the mortgage contract retroactively to restore equity to any mortgage borrower because the value of his or her home declined, what responsible lender will take the equity risk of financing mortgages in the future? What responsible regulator would want lenders to take such risk?”
In January, the firm’s chairman and chief executive, Jamie Dimon, told the panel investigating the roots of the financial crisis that, prior to the collapse, JPMorgan Chase did not conduct any stress tests that showed house prices falling.
“I would say that was probably one of the big misses,” Dimon said. “We stressed almost everything else, but we didn’t see home prices going down 40 percent.”
So the firm made loans, arguably not knowing that the value of the assets backing those loans might one day significantly decline in value.
Read more here: http://www.huffingtonpost.com/2010/04/12/jpmorgan-chase-argues-aga_n_534898.html
