JPMorgan Says Foreclosure Accord With Federal Reserve, OCC May Come Today
JPMorgan Chase & Co. (JPM), the second- biggest U.S. bank by assets, may settle an investigation into the bank’s foreclosure practices by federal regulators as early as today, executives said.
The bank took a $1.1 billion charge and may add as many as 3,000 employees to comply with the consent agreement, Chief Executive Officer Jamie Dimon and Chief Financial Officer Doug Braunstein told reporters on a conference call today after the bank reported a 67 percent increase in net income. The accord involves the Office of the Comptroller of the Currency and the Federal Reserve, the bankers said.
“They are going to issue some very significant changes,” Braunstein said. The agreement will address “weaknesses with our processes and controls” when the bank forecloses on overdue homeowners and cover the New York-based company’s use of affidavits, fees and documentation, he said.
The $1.1 billion writedown on mortgage-servicing rights led the retail-banking division to post its first loss in a year. Revenue from mortgage fees and related income was negative $489 million, the first time the lender has had negative revenue in that business since at least its merger with Bank One Corp. in 2004. The writedown represented about 8 percent of the $13.6 billion total carrying value of the bank’s MSRs at Dec. 31.
While the agreement doesn’t include fines, Dimon said regulators reserved the right to levy penalties in the future.
“There are a lot of interested parties, it’s complex and eventually there will be penalties and fines paid and other changes made to things. So we just don’t know yet,” Dimon said.
Representative Elijah Cummings, a Democrat from Maryland, sent a letter to the OCC, calling on the regulator to postpone the consent agreement and brief Congress on its investigation into foreclosure processes, the lawmaker said today in a statement. The OCC agreed to brief Cummings on the investigation, the statement said.
“I remain deeply concerned with any proposed consent orders that would allow mortgage servicers to continue disregarding their legal and contractual obligations, and that fail to rectify the damage that servicers have inflicted on borrowers, investors, communities, and the U.S. economy,” Cummings said in the letter dated yesterday.
JPMorgan is the third-largest servicer in the U.S., trailing Bank of America Corp. (BAC) and Wells Fargo & Co. Servicers collect payments from borrowers and pass them on to mortgage lenders or investors, less fees. They also keep records, manage escrow accounts and contact delinquent debtors.
Under U.S. accounting rules in place since 1995, banks should report the value of mortgage-servicing rights on a fair- market basis, or roughly what they would bring in a sale. A bank must record a loss whenever it sells MSRs for a price below where they’re marked on the books.
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