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JPM Suffers a 23 Percent Decline in Residential Lending, but Megabank Continues to Hoard Loans for Balance Sheet

By Paul Muolo [e-mail]

JPMorgan Chase originated $24.7 billion of residential loans in the fourth quarter of 2015, a 23.3 percent sequential decline. Compared to the same period a year earlier, fundings were down just 1.2 percent.

The nation?s second-largest residential lender and servicer booked mortgage banking income of $266 million during the period, an ugly 55.8 percent drop from the third quarter. Mortgage profits fell 21.3 percent compared to the fourth quarter of 2014.

Although both earnings and lending volume suffered, mortgage revenue improved by $125 million from 3Q to $1.68 billion in the fourth quarter. In its 4Q earnings statement, JPM attributed the revenue improvement to ?higher MSR [mortgage servicing rights] risk management and loan growth, partially offset by lower repurchase benefit.?

A close look at the megabank?s supplemental info reveals that it continues to add residential whole loans to its balance sheet at an aggressive pace. At Dec. 31, JPM held $157.1 billion of what it calls ?prime mortgages? (including option ARMs), a stunning 48 percent increase over the past 12 months.

The entire banking franchise earned $5.4 billion in 4Q, a 20.5 percent drop from 3Q. In the fourth quarter of 2014 it earned $4.9 billion.