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JPMorgan Chase and Wells Fargo Take Q1 Hits on Drops in Mortgage Production

Robert Ottone
Apr 11, 2014

On Friday, two of the Big Four banks have unveiled their quarterly earnings reports. Overall, the first quarter seems to have had a noticeable ding on JPMorgan Chase and Wells Fargo’s mortgage production, with both companies posting significant losses in both areas. Wells Fargo’s mortgage banking non-interest income was around $1.5 billion, down $60 million from the fourth quarter of 2013. Residential mortgage originations were down by about $14 billion from the fourth quarter of 2013, as well. Average mortgage escrow deposits also showed a dip, somewhere in the vicinity of $14 billion, as well. JPMorgan Chase saw an originations decline of around 68 percent when compared to the previous year, with a more palatable 27 percent decline when compared to the previous quarter. The most staggering decline for JPMorgan Chase is most likely the dip of $559 million from the previous year when it comes to mortgage banking net income. Two key takeaways from the JPMorgan Chase report include the following: ►Mortgage application volumes were $26.1 billion, down 57 percent from the prior year and 17 percent from the prior quarter. ►Period-end total third-party mortgage loans serviced were $803.1 billion, down five percent from the prior year and two percent from the prior quarter. Back in February, we reported on the Big Four’s continued elimination of jobs, no doubt a reflection of the current mortgage climate. “The mortgage market is in a tough place right now because refinancing activity has fallen off very sharply over the last year, and purchase volume is still very slow to recover, reflecting the frustratingly slow recovery in the housing market,” Wells Fargo economist Mark Vitner told The Charlottle Observer at the time. JPMorgan Chase has also been straining under recent public pressure, with high-profile exec Blythe Masters parting ways with the company while also being investigated by the Fed. The allegation is that Masters aided in manipulating power markets in California and the Midwest after paying $410 million to settle the case. A recent Washington Post blog highlighted Jamie Dimon’s pay situation, with one figure illustrating a raise, with the other highlighting a pay cut. Which one is true? Apparently, both. Dimon was reportedly making upwards of $18 million annually, however; he saw his pay dashed to a paltry $11.8 million after a dismal 2013. The converse statement indicates that Dimon’s salary ballooned up to $20 million, then increased from $11.5 in 2012. The absurd winter weather of 2014 we’ve been experiencing is also clearly to blame as a deterrent in the homebuying season. "Though the decline in starts is largely weather related, it is worth noting that on the upside, housing production for the fourth quarter was above one million for the first time since 2008 while single-family permits held relatively steady," said National Association of Home Builders (NAHB) Chief Economist David Crowe at the time. "The less weather sensitive permits data suggests that our forecast for solid growth in single-family housing production in 2014 remains on track, as pent-up housing demand is unleashed." MarketWatch highlights the 76 percent drop in originations for the first quarter as a major player in damaging two of the Big Four companies. There’s also a 21 percent decline in bond-trading revenue, a major contributor. Both companies have made around two percent back of their losses, as a whole. Stocks, as a direct result of the JPMorgan Chase and Wells Fargo dips, have dropped, as well.
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