The residential finance division of JPMorgan Chase posted pretax earnings of $1.1 billion on its origination business in the third quarter, almost double of what it took in a year ago.
Overall, the unit known simply as "Chase" earned $563 million from mortgage banking—after taxes and servicing markdowns are factored in. In 3Q of 2011 Chase earned $358 million.
Chase’s performance is
Chase originated $47.3 billion of one-to-four family loans in 3Q, an 8% gain from 2Q and a 29% improvement from the same period a year ago. Retail and direct-to-consumer fundings came it at almost $26 billion, a 2% decline from the second quarter. (Chase buys closed mortgages from other lenders through the correspondent purchase channel and provides warehouse lines of credit to certain nonbank lenders.)
Although Chase hit a home run in originations, its servicing operation reported a pretax loss of $159 million, compared with a pretax loss of $153 million in the prior year. The bank said it took an “incremental expense for foreclosure-related matters” of $100 million.
The bank’s third-party residential servicing balances fell 12% to $814.8 billion. The comparison is to the year ago period. Compared to 2Q balances fell 5%. (Chase also services loans for its own portfolio.)
JPM had real estate credit losses of $520 million during the period, compared with $899 million in the prior year. “The current quarter provision reflected a $900 million reduction in the allowance for loan losses due to improved delinquency trends and lower estimated losses, primarily in the home equity portfolio,” the company said in a press statement. “Net charge-offs totaled $1.4 billion, including $825 million of incremental charge-offs reported in accordance with regulatory guidance requiring loans discharged under Chapter 7 bankruptcy and not reaffirmed by the borrower to be charged off to their collateral value and to be considered nonaccrual, regardless of their delinquency status.”
The entire company earned a record $5.7 billion in 3Q, compared with net income of $4.3 billion in the third quarter of 2011.
