Chase mortgage servicing expenses near $1 billion

Mortgage servicing expenses at JPMorgan Chase (JPM) totaled roughly $925 million in the fourth quarter, up $59 million from the previous three months, according to its earnings report Friday. The bank's chief financial officer Doug Braunstein said 75% of the expenses were directly related to default and foreclosure costs. Servicing expenses were down $33 million from the same period the year before, but foreclosure-related costs was a smaller fraction then. "We expect that to remain elevated through the first half of 2012," Braunstein said in a conference call with investors. The bank's earnings were down 23% in the fourth quarter, though it did earn record profits for the entire year. The mortgage division at Chase reported a net loss of $258 million, compared to $330 million in net profit for the fourth quarter of last year. Litigation expense actually dropped to roughly $500 million from $1.5 billion one year ago, most of it related to mortgage matters. But the servicing department alone hemorrhaged $586 million in losses during the fourth quarter after turning $14 million in net income the same period the year before. The bank along with 13 other servicing firms signed consent orders with federal regulators in April pledging to overhaul operations, install single points of contact for delinquent borrowers and to correct mishandled documentation filed in state court houses in many states. Revenue to the servicing department dropped 9% from one year ago to $1.1 billion in 4Q. Chase said that was due to a decline in third-party loans. Analysts at Moody's Investors Service said in a report released Thursday that the mortgage servicing industry will continue to see a lot of consolidation as larger banks like Chase shed subprime servicing rights. "The consolidation will be credit positive for existing private-label RMBS, only as long as the new servicer can absorb the increased volumes without sacrificing performance," Moody's said. Write to Jon Prior. Follow him on Twitter @JonAPrior.

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