JPM Chase – Major Mortgage Loan Default Spike

Posted on October 31st, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

As part of my day job at Field Check Group, Real Estate & Finance we analyze the entire housing & mortgage universe including extremely granular mortgage default and foreclosure data by lender, not available to most.

While Chase’s mortgage modification announcement today makes a whole lot of sense from the stand point of ridding themselves of WaMu’s toxic Pay Option and Subprime loans at a better price than bulking them to the highest bidder, Chase has some problems with their own past loan originations as well.

JP Morgan to Modify Mortgages to Limit Foreclosures

By Elizabeth Hester

Oct. 31 (Bloomberg) — JPMorgan Chase & Co., the largest U.S. bank by market value, plans to modify terms on $110 billion of mortgages and forgo foreclosure proceedings on all real-estate loans while the changes are implemented in the next 90 days.

The offer extends to customers of Washington Mutual Inc., the savings and loan JPMorgan agreed to buy last month, the New York-based bank said today in a statement. Loan modifications may include interest-rate or principal reductions. The bank said it will establish 24 regional counseling centers to provide face-to- face help in areas with high delinquency rates.

“We felt it is our responsibility to provide additional help to homeowners during these challenging times,” said Charlie Scharf, chief executive officer of retail financial services at JPMorgan Chase. “We will work with families who want to save their homes but are struggling to make their payments.”

Remember, a few months back when Jamie Dimon said that they got aggressive in the mortgage market pushing products like Jumbo Prime especially hard in 2007? Well, below show the extent at which their past loan originations are turning into loan defaults.

This chart below represents the percentage increase in 2008 vs. 2007 in mortgage loan Notice-of-Defaults that each company originated. Granted, some of these loans may have been sold, securitized etc, but they also kept a large number of originations which are likely performing at the same rate.  This chart shows which firms had serious mortgage related risk management lapses. This does not include second mortgages of which Chase is also loaded to the gills.

Please note this chart makes no reference to dollar volume, as that information is only available to clients. Sorry. However, I do feel that the percentage change year-over-year is equally important when evaluating potential risk. -Best, Mr Mortgage

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13 Responses to “JPM Chase – Major Mortgage Loan Default Spike”

  1. Have you noticed yet? What company name seems to always come up as part of any financial story? There is actually a few of them, but the number one culprit behind just about everything is JP MORGAN CHASE!

    1.)Who holds 50% of all U.S. Derivatives & CDS Contracts?
    2.)Who is behind & responsible for the COMEX Gold Fraud?
    3.)Who was behind the collapse of Bear Sterns?
    4.)Who was behind the collapse of Lehman Brothers?
    5.)Who was behind the collapse of WaMu?



    PS. Keep your eye on PIMCO Too, there is something very wrong with that company too.

  2. Given how the data is displayed, JP Morgan Chase could have the lowest overall default rate. All that is displayed is the rate of change. Maybe it proves a point, maybe it means nothing.

  3. This is great news!!! Chase now has my mortgage and I’ve been on time every month with my payment at 15 yrs. and 5.125% fixed. I think I’ll call up and see if they can reduce my rate to 4% fixed or maybe even 3% so I can stay in my home and go out and take the excess funds and buy a brand new Lexus or even put a pool in my yard. The hardship of not driving a top of the line auto and having a backyard oasis is just too much.

    Thank you Congress and Barney Frank and Hank Paulson.

    This is all great. That’s why we need Obama in the White House, we all too can benefit from handouts if we just expand every program to every taxpayer, regardless of need!!!!!!

  4. Mr. Mortgage

    Are you saying that JP Morgan put out the most poisonous products at the end of the boom? Or is the increase more due to an acceleration late into the game?

    Or are you suggesting they had the lowest standards of approvals, low or no doc?

    Another question. The fed currently has sub prime and Alt A loans on the website, yet they have not included jumbo’s on their map. What is the size of the Jumbo market compared to Alt A?

    Last, the Alt A is primarily California in dollar volume. Are the Jumbo % originated in CA similar in concentration in dollar volume like the Alt A or is it bigger/smaller?

  5. Is this good news or bad news?

    I don’t know if it will be effective in the end, but isn’t it a step in the right direction?

    What does this mean for the market going forward?

  6. @ JJ

    LMAO! That is some great writing! Love your style. 😀

    Mr. Mortgage, I’ve recommended your youtube vids to everyone I know, and religiously read your posts — you’re doing a great service to everyone, and I thank you!

  7. Well now, if I were to think of this in terms of forecasting 2009 foreclosures, I’d conclude it may be worse than 2008. This is based on the assumption that very few NOD’s are getting cured and that it’s now about 12 months from NOD to NOT. This is what I’ve been hearing. Anyone know how close to the mark my assumptions may be?

  8. That will likely depend on how successful they are in doing modifications. The slower they act, the further prices are going to get pushed down and the bigger the hit they are going to have to take on the modifications. What the banks are willing to do is likely going to depend on what their balance sheets are going to look like once they mark it down. If the banks don’t have the assets to do the modifications, then they will continue to hide and shift while offering half measures to consumers.

    My guess is that home sales and prices did not do well in October. Compounding the problem is that we are in a recession and banks are going to have to be dealing with borrowers with job losses.

  9. JJ

    You are a god and very blessed to have such a perfect life. I wish I was you.

  10. Chase has been in trouble for a long time and their purchase of WAMU and Bear Stearns makes as much sense as buying a Ford Pinto for the purpose reliability. Thanks to our corrupt Government they are still in business much like BOA and WFB and Citi it’s a complete scandal.

  11. I’m leaning towards rising unemployment as making this an inescapable checkmate for the banks. As modification most likely will not cure a loan where the borrower is unemployed. And as this drags on, the walk-aways will escalate along with the number of forced foreclosures. Not a pretty picture.

  12. On a national basis this is an ugly problem because employment was the last leg holding the house of cards together. Forget the election, certain industries and regions in this country are toast and will be lousy for the next decade or so. Bank on it.

    This crisis is national but really more of a regional one in certain states but the bleed over effect and nationalization and socialization of this problem makes it mine too even if I live in an area that will not get hit as hard.

  13. Well California says they have a 10% budget shortfall so far and since we are going to be 50% into the budget, that means we are 20% short in the second half…. Get your snorkels out. Job cuts and more taxes on the horizon should accelerate the foreclosure problem.

    I heare the clock ticking on CA’s debt ratings.

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