JPMorgan Chase reported strong mortgage results for the first quarter, noting that residential applications rose 33% from the year ago period with chairman and CEO Jamie Dimon declaring that housing is “very close” to a bottom.
During a conference call with reporters, Dimon (in response to a question) said “don't expect” JPM to sell much in the way of servicing rights going forward. Although the megabank has unloaded select portions of its MSR portfolio the past year, sales will depend on market conditions, he said.
He also said that JPM's loan purchase problems with Fannie Mae and Freddie Mac appear to be a thing of the past. The bank expects roughly $300 million a quarter in GSE buybacks over the next few quarters.
However, JPM set aside $2.5 billion in 1Q for what it calls “additional litigation reserves, predominantly for mortgage-related matters.” CFO Doug Braunstein said most of that reserve charge is tied to private label securities where representation and warranty claims are involved.
Chase, the brand name of JPM's mortgage business, funded $38.4 billion of home loans in 1Q, up 6% from 4Q, but just about flat from the same period last year. Dimon said mortgage volumes “are good but not great,” noting that HARP production is helping the market.
The bank reported mortgage production and servicing net income of $461 million in 1Q, compared to a net loss of $1.1 billion in the year ago quarter. On the revenue side JPM achieved record production related revenue of $1 billion. (But when loan repurchase costs are factored in that number falls to $744 million.)
Dimon attributed that strong performance to mortgage spreads being higher in the quarter.
As far as nonperforming loans are concerned, JPM has $10 billion in delinquent notes, down from $13 billion in 1Q 2011.
Dimon said the U.S. consumer is in better shape than some might think, saying debt-service ratios “haven't been this low in 20 years.” He also cautioned reporters not to read too much into the monthly employment numbers, which were weaker than anticipated last month.
“Credit conditions are continuing to improve,” said Braunstein.
The entire bank reported first quarter earnings of $5.4 billion, down 4% from a year ago but higher than the consensus estimates.
