JPMorgan Chase leans heavier on mortgage lending, servicing
Growth in fourth-quarter mortgage banking activity helped JPMorgan Chase (JPM) book stronger income and revenue for the period.
The mega bank's mortgage banking business recorded $51.2 billion in originations for 4Q, up 33% from a year earlier and an increase of 8% from the third quarter.
Mortgage loan application volumes also grew 25% from the previous year, hitting $65.7 billion in the fourth quarter, while still down 10% from the previous period.
JPMorgan is beginning to resolve issues tied to legacy mortage issues with the company signing onto the recent $8.5 billion national foreclosure review settlement. Chase posted $900 million in pretax expenses in 4Q for mortgage-rated matters, predominately the foreclosure review settlement.
The firm also posted $700 million pretax benefits from reduced mortgage loan loss reserve in real estate portfolios.
"During the course of 2012, JPMorgan Chase was able to make more of an impact on our communities than ever before," said Jamie Dimon, chairman and chief executive officer of JPMorgan Chase.
He added, "We also originated more than 920,000 mortgages and provided credit cards to about 6.7 million people."
Mortgage banking reported net income of $418 million, compared with a net loss of $269 million a year prior.
Mortgage production-related revenue, excluding repurchase losses, was $1.6 billion, up 51% to $543 million from the previous year. This was a result of wider margins, driven by favorable market conditions and higher volumes due to historically low interest rates and the Home Affordable Refinance Programs.
The fourth quarter of 2012 reflected a $249 million reduction in the repurchase liability and lower realized repurchase losses compared with the previous year and previous quarter. This was primarily driven by improved cure rates on agency repurchase demands.
Since 2009, Chase has offered more than 1.4 million mortgage modifications and completed 610,00 for both loans owned by the firm and those serviced by others.
In regards to Chase-owned mortgages, through modifications and short sales, the firm has effectively forgiven more than $10 billion of principal and reduced borrowers' interest payments by $2 billion.
"We are committed to doing our part to speed the recovery of the housing market. This includes working with struggling homeowners to modify their loans, or pursue other options to allow them to prevent foreclosure," Dimon said.
Mortgage servicing revenue, including amortization, was $618 million, a decrease of $98 million, or 14% from a year earlier.
Mortgage servicing rights (MSR) risk management income was $42 million, compared with a loss of $377 million the previous year. Servicing expense was $1.6 billion, an increase of $648 million from last year.
The $70 billion servicing portfolio increased Chase’s $1.1 trillion mortgage servicing business by more than 5%.