Dimon downplays foreclosure messOctober 13, 2010: 10:47 AM ET
JPMorgan Chase dismissed foreclosure worries, even as the bank added more than $1 billion to its legal reserves.
JPMorgan (JPM) is reviewing 115,000 mortgage affidavits, the bank told investors Wednesday after posting a $4.4 billion third-quarter profit. Last month, JPMorgan Chase said it was reviewing 56,000 foreclosure cases.
It and other banks have put foreclosures on hold as they review their handling of homeownership documents. A group of 40 state attorneys general is promising to investigate whether big banks such as Chase, Bank of America (BAC) and Wells Fargo (WFC) wrongfully evicted homeowners based on faulty paperwork.
JPMorgan conceded Wednesday that it has found cases in which the signers of foreclosure affidavits didn't personally review underlying loan files, as they are required to. It also said affidavits weren't properly notarized in some cases.
But CEO Jamie Dimon stressed that the bank continues to believe it acted properly, and downplayed the notion that profits could be seriously hit by the fallout from the latest banking industry scandal.
"We've known there are issues for a while," he said of the foreclosure process. But, he stressed, "We're not evicting people who deserve to stay in their house."
JPMorgan added $1.3 billion to its reserve for legal costs in the third quarter. Dimon said that move wasn't driven specifically by the foreclosure issues, though he conceded that the bank could pay "some penalties eventually to the AGs."
Analysts said JPMorgan, which spent years promoting its "fortress" balance sheet, is bracing for a storm even if it says otherwise.
"We think JPM is building a war chest against mortgage related litigation," Morgan Stanley analyst Betsy Graseck wrote.