JPMorgan Chase May Face Enforcement Action, Added Costs in Mortgage Probe
JPMorgan May Face Enforcement, Added Costs Mortgage Probes
JB Reed/Bloomberg
JPMorgan Chase & Co., the second-largest U.S. bank by assets, may face enforcement actions, fines and other added costs stemming from probes of its mortgage-servicing procedures.
JPMorgan Chase & Co., the second-largest U.S. bank by assets, may face enforcement actions, fines and other added costs stemming from probes of its mortgage-servicing procedures. Photographer: JB Reed/Bloomberg
JPMorgan Chase & Co., the second- largest U.S. bank by assets, may face enforcement actions, fines and other added costs stemming from probes of its mortgage- servicing procedures.
“The firm expects to incur additional costs and expenses in connection with its efforts to correct and enhance its mortgage foreclosure procedures,” the New York-based company said in its annual filing with the Securities and Exchange Commission yesterday. JPMorgan said it can’t predict the outcome of the federal and state investigations or the financial impact.
Bank of America Corp. and Wells Fargo & Co., the largest and third-largest U.S. banks by assets, said in separate filings last week they may face fines or enforcement actions from state and federal law enforcement agencies tied to their foreclosure practices. The probes may also lead to “significant legal costs,” Charlotte, North Carolina-based Bank of America said. Wells Fargo, based in San Francisco, said in its filing that penalties are likely.
JPMorgan and its subsidiaries are defending themselves in more than 10,000 legal proceedings, including government investigations and civil litigation, the company said. It added $7.4 billion to its litigation reserves in 2010, up from $161 million in 2009. The bank reduced its legal reserves by $781 million the year before.
Possible Tally
JPMorgan said it’s “reasonably possible” that legal proceedings may cause as much as $4.5 billion in additional losses that aren’t covered by its litigation reserves, which were not fully disclosed. Such losses may be as low as zero, it said.
The bank may incur as much as $2 billion in losses beyond accruals to cover demands that it repurchase faulty mortgages, such as loans sold to government-sponsored enterprises Fannie Mae and Freddie Mac. Such losses may also be as low as zero, JPMorgan said. The estimate is contingent on a further decline in home prices.
JPMorgan said its cost of repurchasing mortgage loans sold to the government-sponsored enterprises increased substantially last year, “and there is no assurance that such costs could not continue to increase substantially in the future.” JPMorgan’s repurchase liability to Fannie Mae, Freddie Mac or private companies may “materially and adversely” affect the bank’s future earnings.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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