MORE evidence emerged yesterday of a slow recovery in the US housing market when two of the country’s biggest banks reported a surge in mortgage refinancing.
Jamie Dimon, chief executive of JP Morgan Chase, said he believed the housing market “has turned the corner” after the country’s biggest bank by assets reported a record quarterly profit of $5.3 billion (£3.3bn), up 36 per cent from a year ago.
Wells Fargo reported a 22 per cent increase in its third-quarter profit, also largely a result of a rise in mortgage lending. The largest US home lender reported that mortgage banking revenue jumped more than 50 per cent from a year ago to $2.8bn.
Banks are seeing a jump in home lending as borrowers refinance at low interest rates. Wells made $139bn in mortgages against $89bn a year ago.
JP Morgan Chase said revenue from mortgage loans shot up 29 per cent. About three-quarters of that was from people refinancing, rather than buying new homes. Low interest rates and government help encouraged homeowners to refinance.
Dimon noted that the bank was still seeing a high level of souring mortgage loans and said he expects high default-related expenses “for a while longer”. He added that some homeowners were still struggling under mortgages they can’t afford, saying the bank was working to modify such loans.
The bank set aside an extra $684 million for legal expenses. Chief financial officer Doug Braunstein said the reserves were related to “a variety of issues,” and not just a lawsuit filed last week by the New York attorney general over mortgage-backed securities sold by Bear Stearns which JP Morgan bought in 2008.