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DealBook reports that JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon let out some bad news on JPMorgan's conference call today. Despite beating estimates, DealBook reported that JP Morgan's highest quality, so-called Prime mortgages, were, as Dimon said, "terrible, and we're sorry. We can say it eight times. It looks terrible."
Prime mortgages are not supposed to behave like subprime ones. But disappointment seems to be the big theme with the mortgage industry. Prime mortgages barely defaulted at all in the second quarter of 2007 -- JPMorgan wrote off 0.05% of them a year ago -- taking a $4 million charge. But in the same quarter of 2008, JPMorgan wrote off 0.91% -- and charged off $104 million.
And Dimon expects those Prime losses to triple -- to $300 million. If there's any good news, that $300 million is a mere 15% of the net income it earned this quarter. Still, it suggests the depth of the economic problems that lie ahead.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
7-18-2008 @ 2:01PM
Kate said...
I'm not surprised that prime loans are going sour. Look at how many layoffs the US has had in the last two years. How are hundreds of thousands of people to find new employment consistant with their last wages? They can't. Jobs aren't available. Now you have very sound, financially strong middle class families who are loosing their homes, their perfect credit ratings and their ability to support the rest of country through purchasing products. It's a small ripple that will eventually turn in to a tidal wave. By the time this recession is over, all Americans will be effected one way or another.