Bloomberg News

JPMorgan to Cut Mortgage Holdings to ‘Close to Zero’

July 14, 2011

(Corrects to add Dimon’s title in second paragraph.)

July 14 (Bloomberg) -- JPMorgan Chase & Co. is winding down its $154 billion mortgage portfolio to “close to zero” as the bank works through mortgage losses and litigation over loan- servicing and foreclosure practices.

JPMorgan, which has reduced mortgage holdings by $19.3 billion in the past year, will continue shedding assets by about as much as 15 percent a year “forever,” Chief Executive Officer Jamie Dimon told analysts on a conference call after the New York-based company reported a 13 percent increase in net income for the second quarter.

“It’s going to go down 10 or 15 percent a year until it’s close to zero,” Dimon said in answering a question from Ed Najarian, the head of bank research at International Strategy and Investment Group in New York.

Mortgage losses and litigation costs continue to weigh on JPMorgan’s earnings. The company, the second-largest U.S. bank by assets, added $1.27 billion to its litigation reserves, mostly for mortgage-related issues, and took a $1 billion charge in the second quarter to clean up some of its outstanding foreclosure matters.

Dimon told reporters that the $1 billion charge covered some of the costs to settle charges by U.S. and state officials that the bank improperly foreclosed on borrowers.

It will take “some time” to resolve the mortgage problems and the bank may face more expenses in the future, Dimon said.

“There have been so many flaws in mortgages that it’s just -- it’s been an unmitigated disaster,” Dimon said. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else and it’s going to go on for far too long a time.”

While the bank will continue originating home-equity loans at its current pace of $1 billion to $2 billion a quarter, home loans “will never go back to where they were,” he said.

--Editors: Steve Dickson, William Ahearn

To contact the reporter on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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