JPMorgan Chase CEO Jaime Dimon conceded that the banking giant “made too many mistakes” in underwriting and servicing subprime mortgages in the buildup to the financial crisis.
In his annual letter to investors released Wednesday, Dimon said the bank “participated in the disaster by originating mortgages that wouldn’t have been given a decade earlier (and won’t be given a decade later).”
“And when delinquencies and foreclosures grew dramatically, we were ill prepared operationally to deal with the extraordinary volume of troubled mortgages and upset borrowers,” Dimon wrote.
But Dimon was also somewhat defensive as well, pointing out that JPMorgan inherited many of the toxic mortgage mess – and subsequent tide of foreclosures –from its acquisition of Bear Sterns and Washington Mutual.
“Early in the crisis, we also stopped dealing with mortgage brokers, some of whom underwrote the worst of the mortgages and probably missold mortgages more than most,” Dimon said.
JPMorgan, now the top U.S. bank by assets, “was one of the better actors in this situation,” he said.
For the first time, Dimon addressed extensively the multi-state, $25 billion mortgage settlement between government officials and the top five U.S. lenders, including JPMorgan.
Dimon said the settlement for JPMorgan Chase consists of the following:
- Making cash payments of approximately $1.1 billion (a portion of which will be set aside for payments to borrowers) to 50 states.
- Offering approximately $500 million of refinancing relief to certain “underwater” borrowers whose loans are owned by JPMorgan Chase.
- Providing approximately $3.7 billion of additional relief for certain borrowers, including reductions of principal on first and second liens, payments to assist with short sales, deficiency balance waivers on past foreclosures and short sales, and forbearance assistance for unemployed homeowners.
- Agreeing, along with the other banks, to a new set of enhanced nationwide standards for mortgage servicing, including requirements around single point of contact, staffing levels and training, communication with borrowers and document execution in foreclosure cases.
“We have brought enormous resources to bear on fixing our mortgage business,” Dimon said. “Many of our top executives volunteered to help – and we now have some of our best people from finance, risk, technology and operations devoted to this effort. As a result, we are responding rapidly and are improving across the board.”