""JPMorgan Chase & Co."":http://www.jpmorganchase.com reported Wednesday that the company made $5.6 billion, or $1.28 per share, during the first quarter of 2011, beating market expectations. But the lender's mortgage business took a significant hit, as related revenue fell 75 percent and costs tied to its servicing and foreclosure operations mounted.
[IMAGE] Jaime Dimon, the bank's CEO, told investors that strong performance in the company's other areas of business ""was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues.""
According to ""JPMorgan's earnings report"":http://files.shareholder.com/downloads/ONE/1195818440x0x458590/4ba5444f-3648-4983-8e1f-a0ec7c543949/1Q11_JPMorgan_EPR_FINAL.pdf, during the first quarter of 2011, losses on mortgages and mortgage-related issues included a provision for $1.1 billion in credit losses; a $1.1 billion fair value write-down on the firm's mortgage servicing rights; a $650 million expense for ""the estimated costs of foreclosure-related matters""; and losses of $420 million to cover mortgage buybacks from investors.[COLUMN_BREAK]
""Unfortunately, these losses will continue for a while,"" Dimon said. ""Rest assured, we are fully engaged in fixing our problems and addressing our mistakes from the past, and we will strive to build the best mortgage business going forward.""
Shortly after JPMorgan released its Q1 results, ""federal regulators announced"":http://dsnews.comarticles/regulators-hand-down-enforcement-actions-to-servicers-and-their-vendors-2011-04-13 that they were issuing formal enforcement actions against the bank, as well as 13 other servicers and two third-party providers of foreclosure-related services.
Those actions include a list of mandates for changes to the lender's mortgage servicing and foreclosure processes Ã¢â‚¬" a transformation the bank described as ""significant."" Dimon says the new procedures laid out will likely require as many as 3,000 additional staff.
He also forewarned investors that the company is expected to be hit with monetary penalties and fines as part of the settlement with federal regulators and a separate settlement forthcoming from state attorneys general.
Net revenue from the lender's mortgage banking business was a loss of $114 million during the first three months of this year, compared with net revenue of $962 million in the prior year.
JPMorgan's announcement kicks off banks' reporting season on Q1 earnings. Market expectations are that other lenders will see similar downsides related to their legacy loan portfolios and foreclosure operations.