JPMorgan Chase’s Mortgage Banking Income Declines in 1Q13

Commercial

The mortgage banking operation at JPMorgan Chase reported first-quarter net income of $673 million, a decrease of $306 million, or 31%, when compared with the same period in 2012. The company saw its pretax income for mortgage originations decline by almost 43% although the pretax loss on mortgage servicing improved by over 36%.

JPM had record net income of $6.5 billion for the period, up from $4.9 billion one year prior.

The company said it originated $52.7 billion in 1Q13, up 3% from 4Q12’s $51.2 billion and 37% from 1Q12.

Yet its pretax income was $427 million on production versus $744 million in 1Q12, as revenue was down 25% during the time frame. The higher loan volume only partially offset lower margins.

Production expense increased to $710 million from $573 million because of higher volumes.

However, repurchase losses were $81 million, down from $302 million in the prior year. This quarter’s results include a $100 million reduction in the repurchase liability and lower realized repurchase losses driven by a decline in repurchase demands.

The servicing operation lost $101 million, an improvement over the 1Q12 loss of $160 million. Servicing revenue fell 3% to $778 million. Mortgage servicing rights risk management lost $142 million (one year earlier JPM had a profit of $191 million).

JPM’s servicing for others portfolio declined 4% compared with 1Q12 and 1% with 4Q12 to $849.2 billion at the end of 1Q13.

Its real estate portfolios contributed $784 million to pretax income, down from $854 million in 1Q12, with net revenues of $945 million down 13% in the time frame.

Net charge-off in 1Q13 totaled $448 million of which $333 million came from the home equity loan portfolio and $67 million from the subprime portfolio.

During the quarter, JPM reached an agreement to sell its Melbourne, Fla., servicing platform to Wingspan Portfolio Advisors.

Leave a Reply