JPMorgan Chase mentioned today in its third-quarter earnings presentation that it has increased its reserves against litigation costs by $1.3 billion, and that increase includes provisions against mortgage-related lawsuits — an acknowledgment of the emerging scandal surrounding improperly filed foreclosures. The company is also reviewing 115,000 loan files and will refile affidavits where appropriate. The foreclosure process, broadly speaking, is under review. Beyond that, “We won’t be discussing that a whole lot,” said chief financial officer Doug Braunstein during the company’s conference call for investors and analysts.
One analyst on the call begged to differ. After apologizing for being unable to get closer to his speakerphone because he was in a “conference room with a weird setup,” Banc of America Merrill Lynch analyst Guy Moszkowski asked about the litigation reserve.
Before the call opened up for questions, Braunstein did say that JPMorgan employees charged with signing mortgage affidavits had not always reviewed the underlying loans governing the documents, although some employees did review the loan files. Other documents were not properly notarized, he said. CEO Jamie Dimon said that the amount set aside to protect against lawsuits could go up or down. “Maybe we will have to pay penalties from the AGs eventually, but we think we should just continue” he said.
Asked again about the litigation reserve, Dimon said, “You know our society right?” He indicated that many banks face all sorts of lawsuits. “It ain’t going away. It’s part of the cost of doing business. … When we’re wrong we’re going to settle when we’re right we’re going to fight.”
As for the bank’s foreclosure process, Braunstein said that the bank reaches out to borrowers five days after delinquency and that the entire process can take years, and in many cases from delinquency to foreclosure no principal or interest payments are made on the mortgage. (In other words, an improper signing isn’t much of an indication that a person deserves to keep a home — in a lot of cases borrowers aren’t paying up.)