JPMorgan Chase to acquire seized First Republic

Plus: Lawmakers push back on LLPA fee changes

May 01, 2023

Good morning, folks! Today's newsletter is 750 words, a 3.5-minute read.

🍻 On tap this week: May 3: Federal Open Market Committee policy decision; Chair Jerome Powell’s press conference; May 5: US jobs report

Disclaimer: Average mortgage rates as of April 28, 2023. © MND's Daily Rate Index.

1. JPMorgan Chase to acquire seized First Republic

JPMorgan Chase today announced it has acquired the substantial majority of assets and assumed the deposits and certain other liabilities of First Republic Bank from the Federal Deposit Insurance Corporation (FDIC)

  • “Our government invited us and others to step up, and we did,” JPMorgan CEO Jamie Dimon said in a statement. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”

As part of the deal, JPMorgan and the FDIC have agreed to share the losses and recoveries on First Republic’s single-family and commercial loans. First Republic Bank’s 84 locations in an eight-state footprint are set to reopen under the JPMorgan banner today, the FDIC said.

The bank failure, which overtakes Silicon Valley Bank as the second-largest in U.S. history, is expected to cost the Deposit Insurance Fund $13 billion, the regulator said.

2. Fed seen boosting rates

Federal Reserve policymakers are about to extend their year-long campaign of raising interest rates to beat back still-stubborn inflation, even as risks to the US economy build.

The Federal Open Market Committee is expected to boost the benchmark lending rate target by another quarter percentage point on Wednesday, marking the 10th consecutive increase going back to March of last year.

While officials’ efforts have helped to reduce price pressures in the US economy, inflation remains well above their inflation goal of 2%.

“Signs point to the FOMC raising rates by 25 basis points to 5.25% in the May 3 decision — despite ongoing turmoil in the banking system — and signaling that this will be the last hike for a while. The next phase of the tightening cycle will be to hold rates at that elevated level, while watching to see if inflation trends down.”

Anna Wong, Stuart Paul, Eliza Winger and Jonathan Church, Bloomberg.

3. Lawmakers push back on LLPA fee changes

Two Republican members of Congress, Rep. Andy Biggs of Arizona and Rep. Stephanie Bice of Oklahoma, have introduced bills, H.R. 2928 and H.R. 2876 respectively, aimed at cancelling the Federal Housing Finance Agency's latest adjustments to government-sponsored enterprise mortgage fees.

The lawmakers have expressed concern that the new pricing structure unfairly benefits borrowers with lower credit scores at the expense of those with better payment records. Biggs' bill has more than 30 Republican co-sponsors, while Bice's has 14.

FHFA Director Sandra Thompson recently defended the new pricing structure, stating that it primarily subsidizes lower-income borrowers, not those with lower credit scores, and that higher fees on other products offset these subsidies.

4. More Nuggets

🏠 The housing market is shifting—just look at earnings published by 2 giant Fortune 500 homebuilders. (Fortune)

🏦 PennyMac, reported an overall profit of $30M in Q1 2023 despite declining profitability, with gains in its servicing portfolio offsetting losses in origination activity in a challenging mortgage market. (Market Screener)

🔔 Outside interests: If you wanna be the only person at dinner tonight who knows how nuns got squeezed out of the communion wafer business, watch this.

📄 DocMagic added ADA-compliant mortgage documents to its library, providing visually impaired and disabled users with equal access to the mortgage market. (The Title Report)

5. Wells Fargo × T.D Jakes

Wells Fargo and T.D. Jakes Group have formed a 10-year partnership to revitalize neighborhoods and create long-term change in minority communities in need.

The partnership will focus on initiatives such as affordable housing, small business development, and financial education. Over the next decade, the partnership could result in up to $1 billion in capital and financing from Wells Fargo.

  • The announcement comes a year after Bloomberg reported that only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of white homeowners.

The first project will support the revitalization of nearly 100 acres of Fort McPherson in Atlanta. This partnership is Wells Fargo's largest minority home lending and development initiative to date, following several scandals related to its lending practices.

☀️ See you on Wednesday!

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