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The banks agreed to overhaul their mortgage practices. Because of that commitment and more disciplined internal rules, banks don't make as much money as they once did on mortgage loans. At a time when low interest rates have already reduced income for banks, banks must also assign one banker to each homeowner undergoing a loan modification and make sure every loan has double-checked documentation. At JPMorgan, expenses related to mortgage production increased 35 percent for the quarter to $573 million. At Wells Fargo, total noninterest expenses rose slightly over the year before, mostly from commissions and bonuses for bankers in the mortgage unit and elsewhere. Both Wells Fargo and JPMorgan also put aside more money to pay investors who allege they were misled about mortgage-backed securities that the bank sold them before the financial crisis in the fall of 2008. Dimon said JPMorgan expects high costs from the bursting of the real estate bubble last decade "for a while longer." The bank set aside $2.5 billion to fight legal battles, including over foreclosures. Its chief financial officer said the bank has enough reserves for mortgage-related litigation. Wells Fargo added $314 million to its legal reserves. Despite the increased costs, any growth is welcome at a time when other loans are growing at an even slower pace, says Christopher Mutascio, an analyst for the brokerage Stifel Nicolaus. In a conference call with Wells Fargo executives, bank analyst Nancy Bush asked whether mortgage loan modifications
-- slashing rates, forgiving principal -- would give borrowers an excuse not to meet their mortgage payments. Stumpf said the "vast majority" of Americans want to pay their bills "if they have the income to do it." Loans today, Stumpf said, are more like those made a decade ago, with full documentation and substantial down payments. JPMorgan Chase, the largest U.S. bank by assets, turned a $5.4 billion profit for the quarter, down 3 percent from last year but ahead of Wall Street estimates. Wells Fargo made $4 billion, up from $3.6 billion a year ago. Large banks serve as a barometer of the economy. Citigroup, Bank of America, Goldman Sachs and Morgan Stanley report their results for the first quarter next week.
[Associated
Press;
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