JP Morgan Chase 2010 Annual Report Download - page 76

Management’s discussion and analysis
JPMorgan Chase & Co./2010 Annual Report
76
Selected me
t
rics
As of or for the year ended
December 31,
(in billions, except ratios)
2010
2009
2008
Application volume:
Mortgage application volume
by channel:
Retail
$
115.1
$ 90.9 $
89.1
Wholesale
(f)
2.4 4.9
58.6
Correspondent
(f)
97.3 110.8
86.9
Total mortgage applic
a
tion
volume $ 214.8 $ 206.6 $
234.6
Average mortgage loans held-for-sale
and loans at fair value(g) $ 15.4 $ 16.2 $
14.6
Average assets
126.0
115.0
98.8
Repurchase reserve (ending)
3.0
1.4
1.0
Third
-
party mortgage loans se
r
viced
(ending) 967.5 1,082.1
1,172.6
Third
-
party mortgage loans se
r
viced
(average) 1,037.6 1,119.1
774.9
MSR net carrying value (ending)
13.6
15.5
9.3
Ratio of MSR net carrying value
(ending) to third-party mortgage
loans serviced (ending) 1.41%
1.43%
0.79
%
Ratio of ann
ualized loan servicing
revenue to third-party mortgage
loans serviced (average) 0.44 0.44
0.42
MSR revenue multiple
(h)
3.20x 3.25x
1.88
x
Supplemental mortgage fees
and related income details
As of or for the year ended
December 31, (in millions) 2010 2009
2008
Net production revenue:
Production revenue
$
3,440
$ 2,115 $
1,150
Repurchase losses
(2,912)
(1,612)
(252
)
Net production revenue
528
503
898
Net mortgage servicing revenue:
Operating revenue:
Loan servicing revenue
4,575
4,942
3,258
Other changes in MSR asset
fair value (2,384) (3,279)
(2,052
)
Total operating revenue
2,191
1,663
1,206
Risk management:
Changes in MSR asset fair value
due to inputs or assumptions
in model (2,268) 5,804
(6,849
)
Derivative valuation adjus
t
ments
and other 3,404 (4,176)
8,366
Total risk ma
n
agement
1,136
1,628
1,517
Total net mortgage servicing
revenue 3,327 3,291
2,723
Mortgage fees and related
income $ 3,855 $ 3,794 $
3,621
(a) Predominantly represents prime loans repurchased from Government National
Mortgage Association (“Ginnie Mae”) pools, which are insured by U.S.
government agencies. See further discussion of loans repurchased from Ginnie
Mae pools in Repurchase liability on pages 98–101 of this Annual Report.
(b) Total average loans owned includes loans held-for-sale of $1.3 billion, $2.2
billion and $2.8 billion for the years ended December 31, 2010, 2009 and
2008, respectively. These amounts are excluded when calculating the net
charge-off rate.
(c) Excludes mortgage loans that are insured by U.S. government agencies of
$11.4 billion, $9.7 billion and $3.5 billion at December 31, 2010, 2009 and
2008, respectively. These amounts are excluded as reimbursement of
insured amounts is proceeding normally.
(d) Excludes loans that are 30 days past due and still accruing, which are
insured by U.S. government agencies under the FFELP, of $1.1 billion, $942
million and $824 million at December 31, 2010, 2009 and 2008,
respectively. These amounts are excluded as reimbursement of insured
amounts is proceeding normally.
(e) At December 31, 2010, 2009 and 2008, nonperforming assets excluded: (1)
mortgage loans insured by U.S. government agencies of $10.5 billion, $9.0
billion and $3.0 billion, respectively, that are 90 days past due and accruing
at the guaranteed reimbursement rate; (2) real estate owned insured by U.S.
government agencies of $1.9 billion, $579 million and $364 million,
respectively; and (3) student loans that are 90 days past due and still
accruing, which are insured by U.S. government agencies under the FFELP,
of $625 million, $542 million and $437 million, respectively. These amounts
are excluded as reimbursement of insured amounts is proceeding normally.
(f) Includes rural housing loans sourced through brokers and correspondents,
which are underwritten under U.S. Department of Agriculture guidelines.
Prior period amounts have been revised to conform with the current period
presentation.
(g) Loans at fair value consist of prime mortgages originated with the intent to
sell that are accounted for at fair value and classified as trading assets on
the Consolidated Balance Sheets. Average balances of these loans totaled
$15.2 billion, $15.8 billion and $14.2 billion for the years ended December
31, 2010, 2009 and 2008, respectively.
(h) Represents the ratio of MSR net carrying value (ending) to third-party
mortgage loans serviced (ending) divided by the ratio of annualized loan
servicing revenue to third-party mortgage loans serviced (average).
Mortgage origination channels comprise the following:
Retail – Borrowers who are buying or refinancing a home
through direct contact with a mortgage banker employed by the
Firm using a branch office, the Internet or by phone. Borrowers
are frequently referred to a mortgage banker by a banker in a
Chase branch, real estate brokers, home builders or other third
parties.
Wholesale – A third-party mortgage broker refers loan
applications to a mortgage banker at the Firm. Brokers are
independent loan originators that specialize in finding and
counseling borrowers but do not provide funding for loans. The
Firm exited the broker channel during 2008.
Correspondent – Banks, thrifts, other mortgage banks and
other financial institutions that sell closed loans to the Firm.
Correspondent negotiated transactions (“CNTs”) – These
transactions occur when mid- to large-sized mortgage lenders,
banks and bank-owned mortgage companies sell servicing to the
Firm, on an as-originated basis, and exclude purchased bulk
servicing transactions. These transactions supplement traditional
production channels and provide growth opportunities in the
servicing portfolio in stable and periods of rising interest rates.
Net production revenue – Includes net gains or losses on
originations and sales of prime and subprime mortgage loans,
other production-related fees and losses related to the repurchase
of previously-sold loans.