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JPMorgan, Home Equity Losses and Tax Foreclosures

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By : John Cutts    99 or more times read
New York City banking firm JPMorgan has warned its investors of bleaker things to come during a shareholder meeting in the city on Thursday. The bank said losses from home-equity lending could rise to $1.4 billion for every quarter in 2009. Last quarter, the bank posted a loss of $770 million in its home equity lending operations. It could be said that among the bank’s home equity borrowers are individuals who lost properties to tax foreclosures.

Charlie Scharf, chief of consumer banking operations at JPMorgan, said losses from home equity will continue to rise because of the continued fall in home prices around the country and the global economic downturn. Home prices continued their downward direction despite President Obama’s announcement of its foreclosure program because of the surplus of foreclosed homes being sold at distressed prices around the country. This surplus is compounded by properties from tax foreclosures being added to the market.

JPMorgan also told its investors it thinks the country’s unemployment rate would rise to 9 percent in 2009, affirming its previous expectation that the net charge-offs in credit card operations would reach 7 percent in the current quarter. An increase in tax foreclosures is an indication of personal finance difficulties that could increase bad credit card debts.

Expected results at Washington Mutual (WaMu) are also dim. WaMu is the Seattle-based bankrupt savings and loan association JPMorgan it acquired in September 2008 in a $1.9 billion deal. Among probable causes of WaMu’s failure are loans unpaid by depositors troubled by tax foreclosures. Included in the acquisition are WaMu’s assets and financial contracts. When WaMu failed, it was closed by the Federal Deposit Insurance Corporation and then sold to JPMorgan.

In December 2008, JPMorgan released plans of laying off 9,200 workers at WaMu. Now it is saying it will cut about 12,000 jobs after the WaMu acquisition. Bank executives did not say if the cuts would all be in WaMu or in JPMorgan Chase’s other banking businesses. This mass lay-off would exacerbate the situations of property owners hit by tax foreclosures.

One of the few positive things discussed during the investors’ meeting was the positive stock performance of JPMorgan on Thursday. JPMorgan gained 9 percent on the New York Stock Exchange in the morning trading. At the very least, JPMorgan shareholders losing to tax foreclosures have consolation.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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