Mortgage originations at JPMorgan Chase (JPM) dropped 29% since the end of 2010, kicking off a year where industrywide originations are projected to drop below $1 trillion.

JPM originated $36.2 million in mortgages — more than 180,000 loans — in the first quarter of 2011, down from nearly $51 million in 4Q10, but up 14% from 1Q10.

While all origination channels declined, the quarter-over-quarter drop was attributed primarily to JPMorgan’s correspondent channel, which saw origination volume decline 47% to $13.5 million.
Application volume fell nearly 22% from 4Q10 to $45.2 million, but remained 15% higher than application volume in 1Q10.

More than $1 billion of JPM’s $1.3 billion provision for credit losses was reserved for mortgage and real estate-related loans, including loss provisions of $720 million for home equity loans and $186 million for subprime mortgages. But the total credit loss provision was down 46% from 4Q10.

JPM’s mortgage banking unit recorded a net loss of $114 million, down 112% from a profit of $962 million in 4Q10. JPM reported total net income of $5.6 billion in 1Q11 Wednesday.
The portfolio of nonperforming assets in JPM’s mortgage banking, auto and other consumer lending unit was $931 million in 1Q11, down about 7% from both the previous and prior year quarters. Its 30-day delinquency rate was 1.59%, down from 1.68% in 4Q10.

Excluded from that figure are nonperforming assets insured by U.S. government agencies—$9.8 billion in 90-day delinquent mortgages and $2.3 billion in real estate owned properties. The value of the mortgages was down about 7% from the fourth quarter, while the REO value was up about 2% from the same period.

JPMorgan Chase saw its mortgage-related revenue get hammered in the first quarter, falling a stunning 75% to $696 million (compared to 4Q), as originations declined and the firm focused resources on its massive servicing portfolio and dealing with legal issues tied to that business.
Among other items, JPM booked a $1.1 billion charge for what it called "the impact of increased servicing costs" tied to the fair value of its MSRs. (JPM is the nation's third largest residential servicer, behind Bank of America and Wells Fargo. The mortgage division’s revenues are lumped in with auto and “other consumer lending” but residential accounts for the lion's share of the numbers.)

In a conference call Wednesday morning to discuss first quarter results, company officials noted that it expects to receive, today, a consent order from the Comptroller of the Currency (OCC) and the Federal Reserve that will move to resolve issues tied to its servicing and foreclosure practices.

Although JPM's residential mortgage unit took in $696 million in revenue, it suffered $2.1 billion in non-interest expenses.

The bank said the charges in the mortgage unit include a $1.1 billion hit for credit losses; the $1.1 billion writedown on MSRs; a $650 million expense for "the estimated costs of foreclosure related matters" and repurchase requests valued at $420 million. (All totaled these charges come to $3.09 billion. No explanation was provided whether double counting is involved.)

"These costs are our best current estimate for affidavit related delays as well as certain legal expenses," said CFO Doug Braunstein during the call. "We don't view these costs as run-rate expenses."

But the CFO added that, "there can clearly be further costs associated with these foreclosure and affidavit issues before we're finished." JPM chairman and CEO Jamie Dimon chimed in: "And it does not include any related penalties."

In first quarter JPM's residential mortgage business posted a net loss of $937 million compared to a $577 million profit in 4Q. In 1Q10, the mortgage business earned $257 million.

Despite the huge charge for mortgages, JPM, company-wide, posted a net profit of $5.6 billion in the quarter, driven mostly by its investment banking business.

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