The residential mortgage division of JPMorgan Chase saw its net earnings more than double to $577 million in the fourth quarter, thanks to rising loan demand and strong profit margins in residential finance.
Moreover, during an earnings conference call early Friday morning company executives predicted that the megabank's GSE-related buyback problems would end this year. In the fourth quarter, JPM took a $340 million charge because of Fannie Mae/Freddie Mac related buybacks. (Since the buyback plague began two years ago, Chase has taken $2.6 billion in charges because of repurchases.)
The bank still has exposure on the private label (repurchase) side and company executives predicted that they won't know for years exactly how much it will cost the company.
On the origination front, JPM chief Jamie Dimon told analysts and reporters that residential loan demand probably peaked in the fourth quarter and that it's highly unlikely that Chase would match the fourth quarter's production total of $56 billion. "Last month [December] application volumes were pretty low," he said. "That number [the $50 billion] has to come down."
Compared to 4Q09, residential production jumped by 46%. Compared to 3Q fundings were up 24%.
In the mortgage space, the bank posted total revenue of $2 billion, double what it posted in 4Q09. Mortgage fee income totaled $1.6 billion.
Although, JPM posted strong mortgage earnings, it is still saddled with $3.8 billion of prime nonperforming prime mortgages, along with $1.2 billion in NPL home equity loans. It also has $2.2 billion in NPL subprime mortgages. However, all these balances are down compared to the prior quarter and the same period a year ago.
The entire banking franchise earned $4.8 billion ($1.12 a share) in the fourth quarter compared to $3.3 billion in the period a year ago.