Mortgage Woes Continue for J.P. Morgan – What Does This Mean for You?

by Donald Hanz on Mortgage

In what has become a common theme in the real estate and banking worlds, banking giant J.P. Morgan reported a 67% increase in net income for the first quarter of 2011, up to $5.6 billion from last year’s figure of $3.3 billion.

This number exceeded analyst’s estimates, which is good news for J.P. Morgan. What is bad news for the company, though, is what is contained within the numbers – a total loss of approximately $2.1 billion due to mortgages and housing-related costs.

J.P. Morgan reported a loss of $1.1 billion on servicing its existing mortgage assets, part of the ‘toxic’ real estate assets that it and many other small and large banks have on their balance sheets as a result of plummeting home values over the past three years. It also reported a loss of $650 million due to a record number of foreclosures, and lost $420 million due to mortgage repurchasing.

Spokesmen for the company predict that real estate-related issues will continue for a while, with the specter of litigation coming from a coalition of 50 state attorneys general regarding fraudulent and unfair mortgage lending practices.

What does this mean for the real estate industry as a whole? Well, J.P. Morgan is just one bank – but it’s a big one, and is the first bank to release quarterly earnings. We can expect the same story – big losses due to mortgages and foreclosures – from the rest of the big banks out there.

All in all, the outlook for this area is not good for banks, who expect more underwater homes, more foreclosures, and more short sales throughout 2011 and even 2012. For real estate investors, this will continue to make it more difficult than it has been historically to get a home loan for a home purchase or investment.

With that being said, buying opportunities still abound. The big banks have a lot of assets still on their books that they have to handle somehow, and will be looking to unload them throughout the year to willing buyers below fair value prices.