Wells Fargo and JPMorgan both reported huge profits. And a big chunk is thanks to an explicit government policy to keep mortgage rates low. Matthew Zeitlin reports on who’s winning and why.
On Friday, the two most valuable banks in the country, Wells Fargo and JPMorgan Chase, both reported massive, strong earnings. JPMorgan reported (PDF) a $5.7 billion third-quarter profit while Wells Fargo came in with $4.9 billion in net income (PDF). And where did much of these profits come from? Not from high-flying trading or investment banking, but from a boring, stodgy business: lending money to homeowners.
The banks’ earnings reflect three very real trends: the subprime bust is receding into the past, exacting a smaller and smaller toll on banks’ balance sheets; the housing market is slowly healing; and the Federal Reserve is deliberately pushing down mortgage rates in order to spur more mortgage lending.
The economy as a whole benefits when home prices rise and owners are able to refinance—the lower mortgage payments means more money can be spent. But the biggest winners are those who are already doing OK: not just JPMorgan and Wells Fargo, but people who already own and have equity in their homes.
Wells Fargo made $2.8 billion in its mortgage business this quarter, with $2.6 billion of that coming from loan origination and sales. The bank originated $139 billion worth of mortgages, had $188 billion of mortgage applications, and held $9.8 billion (that’s all? Maybe it added $9.8 b to its holdings in the quarter) of conforming single family loans (read: not subprime) on its balance sheet this quarter. Some 72 percent of those applications were refinances. Originations were up 9 percent from the previous quarter. But more lending doesn’t mean the bank is taking on more risk. Of the $1.9 trillion in mortgages Wells Fargo services, 71 percent are guaranteed by government entities Fannie Mae, Freddie Mac, or Ginnie Mae. Only 7.1 percent of its mortgages in the second quarter were delinquent or in foreclosure, compared to nearly 13.5 percent for Bank of America and 10.4 percent for JPMorgan. All told, Wells Fargo’s income from mortgages was more than half of its net income for the quarter and more than double its mortgage income from the same point last year.
JPMorgan’s profits were not so dependent on home-lending, but the growth was still impressive. JPMorgan had $47 billion in originations, nearly a 30 percent increase from a year ago and a nine percent increase from last quarter, and earned $563 million in mortgages, up more than 50 percent from this same point last year. Dimon said that “about 75 percent” of the mortgage activity came from refinancing, comparable to Wells Fargo’s 72 percent.
Dimon declared today that housing “had turned a corner.” It’s true, and current homeowners and the big banks who lend to them are gaining the most from the housing comeback. But the gains aren’t evenly distributed.
I received an email from a woman named Hannah Peters from College@Home that share an infographic about the student debt that college grad are facing. She created on Post-graduate students that live at home with their parents. Student debt has become a major issue in this country besides credit card debt. This is truly sad in this country for recent and future grads to be drowning in student debt and unable to pursue other pieces of the American dream. Here is the infographic of the student debt that college grads are facing:
No question, banking’s faced a lot of bad news lately. Now comes word of a scary new low involving the J.P. Morgan Building at 23 Wall Street in Lower Manhattan.
Erected in 1913, it was so universally recognized as the epicenter of American banking that its owner deemed it unnecessary even to affix a nameplate.
The past half decade, however, has seen quite a changeover for the “House of Morgan.” The building, which shares a corner with the New York Stock Exchange and Federal Hall, where George Washington took the oath of office as the nation’s first president, was sold to Chinese and Angolan interests in 2008, according to press reports.
This month arrived an extreme home makeover in reverse. The owners, unable to find even a retailer to move into the four-story neoclassical building permanently, have rented it out as a Halloween City outlet — until the end of the month, anyway.
“We’ve really hit rock bottom to turn the head of finance into a Halloween costume shop,” said Enrique Villegas of Los Angeles, who stopped in with his girlfriend on Thursday.
“What brought me was that white Ghostbusters guy,” Villegas added, referring to an inflatable marshmallow man who stands eight feet and greets visitors while billowing lightly in the breeze outside the building’s front door.
- Jeanette and Bill Gearing ‘tried offering their bank cash for their five-bedroom home but it has been refused’
- A family friend offered to buy the home and they can pay him back
- If forced to vacate next month the family of 10 – including an aunt in their care – believe it will give the bank time to find a higher bidder on their home
A family with seven children who are facing eviction from their foreclosed home say they have found the money to buy it back – but the bank is refusing to sell it until it has heard other potential offers.
Jeanette and Bill Gearing, from Helen, Georgia, claim the bank wants them to leave the house as it would grant them five days in which to accept outside offers, potentially profiting from the family’s loss should someone offer more.
‘My family wants to buy our family farm of many years – but because we are in foreclosure, JP Morgan Chase (the servicer) and US Bank (the trustee), two of the largest banks in the US, are refusing to even hear an offer until we have been evicted,’ Mrs Gearing wrote in a Change.org petition.
Mrs Gearing added that her seven children, ages seven to 17, and their aunt, who suffers from Alzheimer’s disease, all live in the her five-bedroom, custom-built home.
‘My husband did very well,’ Mrs Gearing, 42, told ABC of their 5,500-square-foot home they took a $1.4 million mortgage out on in 2006.
‘We worked very hard, obviously. We’re just victims of the economy just like everyone else. It affected everybody on all levels,’ she said.
Read more: http://www.dailymail.co.uk/news/article-2216981/Gearing-family-seven-children-forced-vacate-bank-foreclosed-home-allow-offers-despite-theirs-buy.html#ixzz298HZ9Zdz