Servicing Expenses Near $1 Billion
JP Morgan Chase was estimated at $925 million in the fourth quarter which put them up $59 million from the past three months, due to its mortgage servicing expenses. Doug Braunstein who is the banks chief financial officer stated that 75% of the expenses were connected to default and foreclosure costs. "We expect that to remain elevated through the first half of 2012," Braunstein said in a conference call with investors.
In the fourth quarter, the bank’s earnings were down 23% but it did receive record profits for the year. The reported net loss for Chase was $258 million when compared to $330 million in net profit for the fourth quarter of last year. Thirteen other servicing firms along with JP Morgan Chase, signed consent orders with federal regulators back in April to overhaul operations, correct mishandled documentation filed in state courthouses in many states and install single point contact for delinquent borrowers. Chase stated that the reasoning for a decrease of 9% in the servicing department was due to a drop in third party loans.
A report released Thursday by analysts at Moody’s Investors Services said that the mortgage servicing industry will continue to see a good amount of consolidations as bigger banks like Chase scale subprime servicing rights. "The consolidation will be credit positive for existing private-label RMBS, only as long as the new servicer can absorb the increased volumes without sacrificing performance," Moody's said