PGA golfer Dustin Johnson sues Nat Hardwick for $3 million theft

PGA golfer Dustin Johnson sues Nat Hardwick for $3 million theft

Former LandCastle Title CEO was Johnson's attorney and "trusted advisor"

Are record-low interest rates masking high-cost mortgage lending?

Five leading economists weigh in and the answer may surprise you

Auction.com partners with Google to predict housing trends

Nowcast will predict in real time
W S
Lending / The Ticker

JPMorgan mortgages as profitable as a 10-year Treasury bond

Where did the incentive to make mortgages go?

balance money and clock
/ Print / Reprints /
| Share More
/ Text Size+

If the lending environment continues, JPMorgan Chase (JPM) might have been better off putting its money into a 10-year Treasury bond rather than provide mortgages. At least that is what one article in Fortune is asserting.

The article noted that every time the bank makes a home loan, on average, it loses $1,500. This is down from $750 per loan from a year ago and marks a significant decline from the $3,300 it booked the year before that.

That might not be all that bad if JPMorgan were still making good money on the other parts of the mortgage process, like collecting interest or selling off loans. But it's not. Interest rates are still near lows. What's more, the rise in interest rates has squeezed the difference between what banks can charge mortgage borrowers and the interest they have to promise the purchasers of those loans. That difference a year or so ago accounted for a huge source of profits.

Put it all together and JPMorgan made just $114 million in income from its entire mortgage operations in the first quarter. That was down from nearly $700 million a year ago and $1.1 billion the quarter after that. But bankers like to talk about their businesses not in total profits but the returns they generate. Three quarters ago, JPMorgan's mortgage business had a return on investment of 23%. Last quarter, it was 3%. JPMorgan could have almost done just as well by putting all of its money in a 10-year Treasury bond and calling it a day.

Source: Fortune
Read full story

Recent Articles by Brena Swanson

Comments powered by Disqus