With a big assist from its mortgage division, JPMorgan Chase reported a record quarterly profit of $5.3 billion on Friday, another encouraging sign that the housing market is finally recovering from a collapse that has cost nearly 4 million families their home.
“We believe the housing market has turned the corner,” said Jamie Dimon, the bank’s chief executive, in a release.
What is less clear is whether JPMorgan Chase has turned the corner in its dealings with struggling homeowners. Under a $25 billion legal deal struck earlier this year with state and federal authorities, JPMorgan Chase and four other large banks promised to overhaul mortgage "servicing" practices, following widespread reports that the bank had botched the management of thousands of home loans, leading in many instances to unnecessary foreclosures. The deadline for compliance was Oct. 3.
JPMorgan Chase spokeswoman Amy Bonitatibus recently told HuffPost that the bank had met all 320 servicing reforms mandated by the settlement. "This has been an enormous effort, as the standards cover all aspects of the servicing business and cover such matters as single point-of-contact, customer service, loss mitigation, anti-blight and tenants' rights," she said.
But many borrowers say they remain stuck in foreclosure limbo as a result of mistakes the bank made in the past that it now refuses to rectify. Neal Braude, a 56-year-old Miami resident, says he is one of these homeowners.
Braude's troubles began in 2010 when the television sports show he produced was cancelled and he lost his job. He applied for a loan modification with JPMorgan Chase in December of that year. After 15 months, nine different "relationship managers" at the bank and dozens of lost documents, he finally got an offer in March, he said.
Unlike many struggling borrowers, Braude is not underwater on his mortgage. His home is in a vibrant neighborhood near the beach and hasn't lost much value. But the modification offer he got would all but ensure that the equity he had built up would get wiped out, he said. In order to keep the payments low, the bank shifted a huge chunk of principal and interest, totalling $160,000, to the end of the term of the loan.
The modification offer also failed to correct a mistaken $15,000 overcharge for a home insurance policy that Braude said he'd complained about from the very beginning. Had the bank corrected that mistake at the outset, he wouldn't have even needed a modification, he said. Additionally, the modification would have tacked $38,000 in "foreclosure and bankruptcy costs" onto his loan that should never have been incurred, he said.
Braude turned the offer down. He said he can afford a reasonable payment, but wants it to fairly reflect what he owes. He is determined to keep his home, he said. "I remodeled the entire house by myself," he said. "There is a lot of my heart and soul in this place. I am very happy and very comfortable and absolutely do not want to move."
JPMorgan did not respond to a request for comment.
"We are acting responsibly to help homeowners and prevent foreclosures, offering nearly 1.4 million mortgage modifications and completing 578,000 since 2009," Dimon said in a press release accompanying the earnings announcement.
It is impossible to say how many homeowners like Braude remain locked in a dispute with JPMorgan Chase, or with the other signatories to the settlement, Wells Fargo, Bank of America, Citigroup and Ally Financial. But the number is likely in the tens of thousands. According to RealtyTrac, about 1 million U.S. home loans are in some stage of default or foreclosure. Practically every homeowner who has been in default for a year or more has a complaint about how their mortgage company managed their account.
Another unsettled question is whether banks are fully complying with the new servicing rules, which require changes such as an end to "dual tracking" -- foreclosing on a borrower who is in some stage of the modification process.
One indication that banks are still making mistakes comes from a recent report by a monitor appointed by California Attorney General Kamala Harris to oversee the settlement in that state. The monitor, Katherine Porter, recently reported that her office had heard complaints from homeowners about bank servicing practices as recently as September, though the number of complaints was trending downward.
Under the settlement, banks face fines of up to $1 million per occurrence should they fail to live up to the terms of the agreement. Based on the profits JPMorgan Chase reported today, the bank can afford to make a lot of mistakes.
The $5.7 billion profit is a 37 percent boost from the year before. Earnings in the mortgage unit increased by 57 percent from the same period a year before, as the bank originated $47 billion in new loans and refinancings.
Consumer and corporate lending led the way, the bank said. Like other lenders, JPMorgan Chase is profiting from an unusually high "spread" between what it charges home mortgage customers to borrow and what it pays for that money.
Though mortgages have become hugely profitable again for JPMorgan Chase, the real money is in the making of new loans and the refinancing of existing loans -- not servicing old ones. The bank's servicing unit reported a pretax loss of $159 million for the last quarter.