July 14, 2011

Chase’s mortgage earnings. More BofA legal woes.

July 14, 2011

Chase’s mortgage earnings. More BofA legal woes.

JPMorgan Chase weighed in with 2Q earnings results, the first of the “big boys” that smaller mortgage banks follow closely. The company had net income of $5.4 billion on revenue of $27.4 billion, up 7% from the prior year. Here’s an excerpt on their mortgage business:

“With respect to our mortgage portfolio, delinquency and net charge-off trends improved modestly compared with the prior quarter; however, net charge-offs remained high, and we expect credit losses to remain elevated…While delinquency trends and net charge-offs have modestly improved compared with both prior periods, the current-quarter provision continued to reflect elevated losses in the mortgage and home equity portfolios. Mortgage Banking net revenue was $1.3 billion, compared with net revenue of $1.2 billion in the prior year.”

More on Chase mortgage earnings:

“Mortgage Banking net revenue included $1.1 billion for mortgage fees and related income, $124 million of net interest income and $106 million of other noninterest revenue. Mortgage fees and related income comprised $544 million of net production revenue, $533 million of servicing operating revenue and $23 million of MSR risk management revenue. Production revenue, excluding repurchase losses, was $767 million, an increase of $91 million, reflecting wider margins. Total production revenue was reduced by $223 million of repurchase losses, compared with repurchase losses of $667 million in the prior year. Servicing operating revenue declined 6% from the prior year, due to run-off of the servicing portfolio, and increased 9% from the prior quarter, reflecting lower amortization of the MSR asset. MSR risk management revenue declined by $288 million from the prior year.”

Chase’s mortgage volume:

“Mortgage loan originations were $34.0 billion, up 6% from the prior year and down 6% from the prior quarter. Total third-party mortgage loans serviced were $940.8 billion, down 11% from the prior year and 1% from the prior quarter.”

Over at Bank of America, maybe this conversation took place.

Boss: “Whew! I am glad we got that $8.5 billion settlement thing out of the way. Now, let’s move on to new business.”

Minion: “Uh, sir, not so fast. I’m afraid the issue is not over…” (Nervous glances around room)

BofA’s legal woes could worsen because six federal home loan banks sought to join a case in which a New York judge will decide whether to approve an $8.5 billion settlement by Bank of America Corp. with Bank of New York Mellon Corp. over mortgage-securitization trusts.

“The FHLBs have not made decisions whether to oppose the settlement,” the Federal Home Loan Banks of Boston, Chicago, Indianapolis, Pittsburgh, San Francisco and Seattle said in a filing. They are seeking to intervene because “the procedures that BNYM has established for approval of the proposed settlement will not provide them enough information on which to make careful and informed decisions.”