OCC foreclosure consent order to cost JPMorgan Chase $1 billion in 1Q
JPMorgan Chase (JPM) reported $1.1 billion in first quarter risk management losses for newly implemented mortgage servicing practices. The rising compliance costs come as a result of the Office of the Comptroller of the Currency and the Federal Reserve investigation into industry-wide foreclosure practices. A spokesman for Chase said the costs come in the form of an adjustment in the fair market value of the mortgage servicing rights. The bank reported $5.6 billion in earnings for the quarter as expenses in the mortgage department went up. The bank's Chief Financial Officer Doug Braunstein said in a conference call with investors Wednesday morning that the first-quarter loss came from a "fair value adjustment for increased servicing costs." CEO Jaime Dimon said the costs do not include a direct fine or penalty. A spokesperson for the OCC said the complete settlement and report will be released Wednesday afternoon. Late in 2010, major mortgage servicers began correcting faulty affidavits signed by employees without a proper view of mortgage documentation in foreclosure cases. Federal regulators and the state attorneys general launched investigations into servicing practices at the major firms. While the OCC and the Fed will announce their own settlement Wednesday, other regulators and the state AGs are still in negotiations that could take months still. A report from a three economists, paid for by the financial services industry, showed the settlements could push foreclosure inventories, raise servicing costs across the industry, and push mortgage rates up for consumers. The Iowa AG, the lead investigator in the case called the study fundamentally "flawed." Write to Jon Prior. Follow him on Twitter @JonAPrior.