JP Morgan Chase 2013 Annual Report Download - page 73

JPMorgan Chase & Co./2013 Annual Report 79
to 2008 (“FHFA Settlement Agreement”). The majority of
the mortgage repurchase demands that the Firm had
received from the GSEs related to loans originated from
2005 to 2008.
The Firm has recognized a mortgage repurchase liability of
$681 million and $2.8 billion as of December 31, 2013 and
2012, respectively. The amount of the mortgage repurchase
liability at December 31, 2013, relates to repurchase losses
associated with loans sold in connection with loan sale and
securitization transactions with the GSEs that are not
covered by the FHFA Settlement Agreement (e.g.,
post-2008 loan sale and securitization transactions,
mortgage insurance rescissions and certain mortgage
insurance settlement-related exposures, as well as certain
other specific exclusions). At December 31, 2013, the Firm
had outstanding repurchase demands of $330 million and
unresolved mortgage insurance rescission notices of $263
million (excluding mortgage insurance rescission notices on
loans for which a repurchase demand also has been
received).
The following table summarizes the change in the mortgage
repurchase liability for each of the periods presented.
Summary of changes in mortgage repurchase liability
Year ended December 31,
(in millions) 2013 2012 2011
Repurchase liability at beginning of
period $ 2,811 $ 3,557 $ 3,285
Net realized losses(a)(b) (1,561) (1,158) (1,263)
Reclassification to
litigation reserve(c) (179) ——
Provision for repurchase losses(d) (390) 412 1,535
Repurchase liability at end of
period $ 681 $ 2,811 $ 3,557
(a) Presented net of third-party recoveries and includes principal losses
and accrued interest on repurchased loans, “make-whole” settlements,
settlements with claimants, and certain related expense. Make-whole
settlements were $414 million, $524 million and $640 million, for the
years ended December 31, 2013, 2012 and 2011, respectively.
(b) The 2013 amount includes $1.1 billion for the FHFA Settlement
Agreement.
(c) Prior to December 31, 2013, in the absence of a repurchase demand
by a party to the relevant contracts, the Firm’s decision to repurchase
loans from private-label securitization trusts when it determined it had
an obligation to do so was recognized in the mortgage repurchase
liability. Pursuant to the terms of the RMBS Trust Settlement, all
repurchase obligations relating to the subject private-label
securitization trusts, whether resulting from a repurchase demand or
otherwise, are now recognized in the Firm’s litigation reserves for this
settlement. The RMBS Trust Settlement is fully accrued as of December
31, 2013.
(d) Included a provision related to new loan sales of $20 million, $112
million and $52 million, for the years ended December 31, 2013,
2012 and 2011, respectively.
Private label securitizations
The liability related to repurchase demands associated with
private label securitizations is separately evaluated by the
Firm in establishing its litigation reserves.
On November 15, 2013, the Firm announced it had reached
a $4.5 billion agreement with 21 major institutional
investors to make a binding offer to the trustees of 330
residential mortgage-backed securities trusts issued by
J.P.Morgan, Chase and Bear Stearns (“RMBS Trust
Settlement”) to resolve all representation and warranty
claims, as well as all servicing claims, on all trusts issued by
J.P.Morgan, Chase and Bear Stearns between 2005 and
2008. The RMBS Trust Settlement may be subject to court
approval. For further information about the RMBS Trust
Settlement, see Note 31 on pages 326–332 of this Annual
Report.
In addition, from 2005 to 2008, Washington Mutual made
certain loan level representations and warranties in
connection with approximately $165 billion of residential
mortgage loans that were originally sold or deposited into
private-label securitizations by Washington Mutual. Of the
$165 billion, approximately $75 billion has been repaid. In
addition, approximately $47 billion of the principal amount
of such loans has liquidated with an average loss severity of
59%. Accordingly, the remaining outstanding principal
balance of these loans as of December 31, 2013, was
approximately $43 billion, of which $10 billion was 60 days
or more past due. The Firm believes that any repurchase
obligations related to these loans remain with the FDIC
receivership.
For additional information regarding the mortgage
repurchase liability, see Note 29 on pages 318–324 of this
Annual Report.