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JPM Mortgage Repurchase And Foreclosure Process Update: 14 Month Average Delinquency At Foreclosure
Today, JPM announced results, which presumably beat on the top line, while the bottom line is largely irrelevant as banks continue to operate under the auspices of FASB mark-to-myth, and as such no numbers can be trusted. As for the improvement in the credit card business, cited largely as a reason for the $1.12 EPS beat compared to $1.00 consensus, when consumers don't have to pay mortgages, they at least can afford to pay for trinkets. Which is why we believe the bulk of the numbers in the company's 23 page Q4 earnings presentation are largely worthless. The two slides that however bear mentioning are 9 and 10, which deal with the elephant in the room, mortgage repurchasing risk, and the foreclosure process update. Below are the highlights, among which we find that as of Q4, the average delinquency at foreclosure for JPM is now 14 months.
Retail Financial Services – year-end 2010 reserve position
- Mortgage repurchase risk assessed and appropriately reserved
- Agency repurchase exposure
- Repurchase losses life to date of $2.6B
- End of period reserve balance of $3.0B; reserved for presented and probable future demands
- 2011 realized losses estimated at $1.2B +/-
- Private label exposure – we have significant reserves
- Agency repurchase exposure
- Real Estate Portfolios
- Total reserves of $9.7B (excluding WaMu purchased credit-impaired) remain; 4Q10 NCOs annualized (before one-time impact) of $4.6B
- WaMu purchased credit-impaired portfolio is appropriately reserved for best estimate of remaining lifetime losses
Based on current conditions, we believe we are well-reserved going into 2011
Update on foreclosure process
We make every effort to avoid foreclosure
- Offered over 1mm modifications; 285,000 completed
- Prevented foreclosures at 2x the rate of those completed
- 51 Chase Home Ownership Centers (CHOCs) – plan to add 25 more in 2011
- 6,000 loss mitigation counselors to assist borrowers, across the country
Key facts about foreclosures
- Average delinquency at foreclosure is 14 months
- Recent foreclosure sales showed the following customer/loan characteristics:
- 57% non-owner occupied, of which 52% were vacant at foreclosure
- 43% owner-occupied, of which:
- 25% were vacant at foreclosure
- 53% did not qualify for modification (e.g., High DTI, unemployed, etc.)
- 18% did not respond to solicitations or trial modifications
Update on foreclosure process
- In September/October, we suspended approximately 127,000 foreclosures in 43 states
- Enhanced foreclosure processes
- All personnel involved in foreclosure affidavit process re-trained and re-certified
- All loans subject to pre-foreclosure sale review to confirm foreclosures are appropriate
- Implemented revised quality assurance and quality control processes
- We are resuming foreclosure proceedings
All fine. We would certainly like to hear however how the bank can make the last claim when it is clearly counterfactual, and espcecially now in a "post-Ibanez" world, the firm finds itself at a huge disadvantage. We will be listening to the 9 am earnings call closely for details.
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A Special Executive Summary of The JPMorgue financial report I'd like to see:
"We would like to extend our wholehearted thanks to the American Taxpayer for supporting us for another year. Our Board met to discuss how to handle paying you all back and, to be frank, reporting our financials, and as a result we are going to report all of our financials with the trillions in support that you all have loaned us broken out seperately. That would be from our bottom line to each and every bonus check. We hope this transparency is appreciated. We will also continue to break out this support until we pay every single dollar back with interest. Please tell us if you would like us to pay in gold or silver as we will move to that basis if you wish."
"Once again thank you so much for your support."
What bothers me is that if you know you have a lot of fuzzy math..why would you as a CEO want to reduce your reserves..and pump your bottom line number when you know the Joe on the street hates you. Why flaunt your wealth in a time of recession or depression. It seems very very cynical to me. Almost criminal.
If they had faith in the future they obviously would manage their storry better.
Bottom line, no faith in future means they have to grab what they can grab now. Pump the bonus now. If they can stretch it another year fine.
I'm short JPM (BAC,JPM and ES mid-year put future options represent short side of my portfolio) and I'm wondering how much short squeezing is goning to happen when they rise dividends or announce buybacks. How long do you think we'll need to get back in 30s in JPM? Are they really able to make up their balancesheets forever?
Can anyone explain to me why QE2 and the POMOs are not inflationary/printing money? I've heard clowns on CNBS/Bloomberg saying that it's just keystrokes on a computer and not real money.
I don't see the logic.
The way I look at it, it is offsetting the deflationary forces. QE is letting the US gov't run roughly $130B/month in deficits to hold the entire economy up. If we had to go to market to raise that money, rates would be soaring. The Fed is keeping rates in check (for now) to allow the ponzi to breathe a few months. So, as everyone in the US is effectively destroying money (credit) by delveraging, the Fed/Treasury are only filling that gap.
They claim that the money does not find its way into the system, but rather the PD's are raising reserves. I personally call bs on that statement, as the banks have been investing the money into the markets. The Fed took care of the transparency by not reporting M3 for use to truely see the money supply.
on Fri, 01/14/2011 - 08:06
#875640
Can anyone explain to me why QE2 and the POMOs are not inflationary/printing money? I've heard clowns on CNBS/Bloomberg saying that it's just keystrokes on a computer and not real money.
I don't see the logic.
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I guess if I really wanted to see the plants... I would have before now, but no matter.
Uncle Sug.....logic need not apply unless it sticks it's hair up under it's hat!
I dont need no logic...we dont need no logic...I DONT HAVE TO SHOW YOU NO LOGIC!...lol...
Honestly...HOW THE FUCK CAN JPM NOT MAKE MORE MONEY WHEN THE GOVT. GIVES THEM 5 BILLION IN FEES A MONTH?
SOMETHING IS WRONG IF YOU MISS EARNINGS AFTER BEN GIVES YOU 5 BILLION...
Uncle Sug.....logic need not apply unless it sticks it's hair up under it's hat!
I dont need no logic...we dont need no logic...I DONT HAVE TO SHOW YOU NO LOGIC!...lol...
Honestly...HOW THE FUCK CAN JPM NOT MAKE MORE MONEY WHEN THE GOVT. GIVES THEM 5 BILLION IN FEES A MONTH?
SOMETHING IS WRONG IF YOU MISS EARNINGS AFTER BEN GIVES YOU 5 BILLION...
and Bloomberg is saying that the JP Morgue is cutting reserves on both credit cards and mortgages. go figure. - Ned
Uncle sugar....it's hilarious. I am a bonafide jack butler from Mr. Mom. I shop to feed my family because if I didnt do it we'd be eating chips/dips and breakfast bars for all meals.
I dont think ANYONE has a REAL idea of how much prices have jumped in the last 5 mos. No clue and less of a clue for the head fuck in charge since he gets served on a silver plate. He has no clue nor does it matter.
It's like a general in paradise while he is ordering his underlings to go and get killed. No sweat off of the General's back...he has no clue.
Inflation is here and getting worse.
Starbucks...Venti coffee (the reg. cup of coffee without all the horseshit in it). $2.41. Now, go to TJ Maxx and get a POUND of coffee ready to go for 6 bucks.
Three "drinks" in every starbucks pays for an hour of labor for their "barristers" making 7 or 8 bucks an hour.
Like Paully said on Good Fella's....."now i gotta turn my back on you".
enough.
Mortgage repurchase risk assessed and appropriately reserved- Private label exposure – we have significant reserves
What the hell does that mean? They are trying to give as little detail as possible so not encourage MBS holders, but trying to reassure shareholders that everything is ok. I've been speaking to a few people at JPM and what's clear is Dimon is very publicly stating it is no biggie, but they know all it takes is one ruling (most likely a New York securities matter) for it to turn ugly, fast.
It's almost a binary risk - either they get a favorable blanket settlement or it's going to take a huge chunk out of their equity....
57% non-owner occupied, of which 52% were vacant at foreclosure
This is astounding! This means that most of the foreclosed homes are probably 2nd homes or vacation homes. Unless there is a further significant repricing in houses, or banks again begin lending without a care as to someone's credit worthiness, these houses will remain empty.
When you do the math and combine vacancies for both owner and non-owner occupied, 40% of all the houses are already vacant at foreclosure.
And yes, a majority of properties are 2nd homes and/or investors/flippers.
If real estate is "improving" then why the need to open up 50% more Chase Home Ownership Centers?Anyone...Bueller..Bueller..Dimon?
It's not improving.
http://globaleconomicanalysis.blogspot.com/2011/01/non-agency-mbs-defaul...
Those charts show that about 25% of mortgages overall are in default. There are 7 million homes in foreclosure. Perhaps another 5 million soon after that.
http://strikelawyer.wordpress.com
This is a well managed catastrophe, but still a catastrophe. And when I say "well-managed" - since it's a catastrophe no matter what anybody does - it's because they're proceeding, but slowly. This turns it into a slowly unfolding catastrophe rather than an abrupt one, reducing (though not eliminating) the risk of riots, assassinations, and so on.
You would think that with all that brain power they could come up with a better plan, yet this is one of the main functions of the central bank system: to slow things down, to smooth things out, to "stabilize" so that people don't get too upset while their lives are ruined. You know the story: the frog jumps out of the hot water, but if you put him in cool water and slowly heat it he stays there until he is dead.
So if they foreclose on 10 million homes in a year you're going to have riots. But they just got done with 1 million in a year and, no riots. Now they're going to try for 1.2; the year after 1.5 Meanwhile, they get to pretend they are collecting on the loans that are delinquent but not foreclosed yet (see Mish Shedlock's page on that) and they've got a lot of loss-spreading for when they actually take possession, with the ultimate bag holder being the government - what else?
The millions who are delinquent and not yet foreclosed on just sit there, collecting their food stamps, wondering when the grim reaper will get to them. He will, if not this year then next year, in the meantime sure, stay in the house and keep it occupied for us. That solves a few problems. Fix the pipes. We'll take it and kick you out when we get around to it, but see what nice guys we are letting you stay there in the meantime?
What a terrible way to live, reduced to serfdom. I wonder: do people prefer a comfortable serfdom under their relatively benign masters who can, after all, suddenly turn on them and evict them; or could they, for once in their lives, take charge of themselves and fight back - not through reprehensible and arbitrary acts of violence but by a restoration of the rule of law?
I've drafted a constitutional amendment to accomplish two primary things: 1) cancel and void virtually every debt in the world as far as the US is concerned; and 2) restore the dollar to a gold standard, which would probably come out to about $25K/oz.
A complete reset. Nobody would owe anybody anything. Everybody and everything would be instantly solvent. The money would no longer be unredeemable debt. But there are a lot of other ramifications.
Would anyone like to see this amendment? I can post it over on my blog.
http://strikelawyer.wordpress.com
50% of dead beats haven't paid in more than a year. Rent for free. When they do foreclose in another year they just simply walk away. This makes honest folks chumps.
Of course your scorn is for the 'deadbeats' fraudulently goaded into 'free money' from banker-gangsters, whereas the real welfare whores have your sympathy.
"Poor little Bank of America should be able to foreclose on anyone, at will, using cooked documents regardless of the egregious fraud they've committed, because Bank of America loves kitty cats," says asteroids.
Light the torches.
http://www.guardian.co.uk/business/2011/jan/14/jp-morgan-bankers-share-10bn
'asteroids' thinks they deserve it.