DIMON ADMITS MORTGAGES ARE FLAWED: “UNMITIGATED DISASTER”
Posted on July 18, 2011 by Neil Garfield
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“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “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 a long time.”
EDITOR’S COMMENT: Straight from the horses mouth. Well maybe not so straight, but Dimon has chosen this moment to admit that the mortgages themselves are flawed. And THAT is why I keep telling everyone to start at the beginning and do the research and examination of each mortgage and each closing carefully. These mortgages, notes and the whole closing transaction are, in my opinion, fatally flawed. Dimon, the head of JP Morgan Chase, agrees.If the mortgages are flawed, then how could they be the subject of foreclosures? And an even better question, how can the states allow non-judicial foreclosures of mortgages they know are flawed. At least require the pretender to plead and prove a case!
Dimon Says Mortgage Clash Swells as ‘Everybody Is Going to Sue’
By Rick Green – Jul 14, 2011 12:14 PM MT
James “Jamie” Dimon, chairman and chief executive officer of JPMorgan Chase & Co. Photographer: Simon Dawson/Bloomberg
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market.
“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “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 a long time.”
JPMorgan disclosed about $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures. The bank added $1.27 billion to litigation reserves, mostly for mortgage matters, and incurred $1 billion of expenses tied to foreclosures, according to a slide show accompanying today’s earnings report. Repurchase losses were $223 million, according to the company, which ranks second by assets among U.S. banks.
Banks are struggling to stanch losses tied to loans based on missing or wrong data about borrowers and properties and are facing probes of foreclosures that may have used falsified documents. Lenders led by Bank of America Corp. (BAC) have reimbursed investors for losses on mortgages, and New York-based JPMorgan said it has $3.3 billion in costs so far on repurchases from government-backed firms such as Fannie Mae.
JPMorgan’s additional litigation reserve may help cover “fees and assessments related to foreclosure delays and payments for other settlements,” including probes by the U.S. Department of Justice and the state attorneys general, the bank said. Litigation reserves also cover projected costs tied to so- called private-label mortgage bonds that may have contained faulty loans, the lender said.
Private-Label
“The private-label stuff will probably go up a little bit,” Dimon said when asked about future expenses to resolve disputes tied to the securities. “But I doubt it will go up more than the reserves we’re going to have to take down in the next 12 months.”
The litigation reserves aren’t earmarked for liabilities tied to Washington Mutual, the lender that JPMorgan acquired after it collapsed during the financial crisis in 2008. JPMorgan said those are the responsibility of the Federal Deposit Insurance Corp., adding that the “FDIC has contested this position.”
The outstanding balance of the Washington Mutual loans was approximately $70 billion as of March 31, with about $24 billion overdue by 60 days or more, according to JPMorgan’s first- quarter regulatory filing.
JPMorgan’s second-quarter net income climbed 13 percent to $5.43 billion as investment banking profit surged and more customers paid credit cards on time, the company said today. The lender advanced $1.08, or 2.7 percent, to $40.70 at 2:41 p.m. in New York Stock Exchange composite trading. The bank declined 6.6 percent this year through yesterday.
To contact the reporter on this story: Rick Green in New York atrgreen18@bloomberg.net
To contact the editor responsible for this story: David Scheer atdscheer@bloomberg.net
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