JPMorgan Chase amps up correspondent lending

Retail origination volumes actually declined in Q4 2020

JPMorgan Chase, the nation’s largest depository bank, increased mortgage origination volume to $32.5 billion in the fourth quarter, a 12% gain from the prior quarter. But that doesn’t quite tell the whole story.

The Jamie Dimon-led bank increased overall mortgage origination volume primarily through its correspondent channel, according to the earnings report issued this week. Its retail originations actually fell slightly in the fourth quarter, likely due to a rise in coronavirus cases across the country (see page 15).

Overall, retail originations declined to $20.1 billion from $20.7 billion in the third quarter, according to its earnings statement. Correspondent volume increased to $12.4 billion, way above the prior quarter’s $8.3 billion in volume.

Even with the overall quarterly increase, the bank isn’t fully back to its pre-pandemic origination volumes. In the fourth quarter of 2019, JPMorgan Chase originated $33.3 billion in mortgages.

It also means that the company’s overall mortgage share continues to slip, as nonbank lenders such as Rocket Companies, United Wholesale Mortgage, Guaranteed Rate, LoanDepot, Homepoint and others step on the gas.

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JPMorgan Chase’s gain-on-sale margins fell to 247 basis points in the fourth quarter, a drop of 17 basis points from the prior quarter. The MSR valuation rose 12% over the prior quarter. The carrying value increased to 74 basis points from 66 basis points last quarter, and the MSR servicing fee multiple increased to 2.64X from 2.28X.

JPMorgan disclosed that, as of Dec. 31, it had $23.5 billion in residential loans with payment deferrals, down from $28.5 billion on Sept. 30 and $54.5 billion on June 30. Approximately 97% of accounts that exited payment deferral are current, the bank said.

Overall, the bank reaped profits of $12.1 billion – $3.79 per share – on revenue of $30.2 billion. That topped analysts’ expected earnings of $2.62 per share on revenue of $28.7 billion. The fourth-quarter figures also topped that of the fourth quarter of 2019, which featured $29.2 billion in revenue.

JPMorgan Chase still has over $30 billion in reserves that had been set aside to protect against credit losses from the ongoing COVID-19 pandemic.

Overall, JPMorgan Chase is servicing $626 billion in mortgages, down 4% from $654 billion in the third quarter and 18% from the $761.4 billion in loans serviced in Q4 2019.

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