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Mortgage Metrics Strong at Chase

While year-over-year earnings were hurt by scandalous trading losses at JPMorgan Chase & Co., the bank increased residential originations, beat down delinquency and raised mortgage earnings. The growth in home-loan fundings appears to be continuing into the current quarter.

Residential loan production was $43.9 billion during the second quarter at the New York-based firm, according to earnings data reported Friday. The number of loans originated exceeded 425,000

Business increased from $38.4 billion in the previous quarter and $34.0 billion in the second quarter of last year.

The latest quarter included $26.1 billion in retail originations, $16.5 billion in correspondent business and $0.2 billion in wholesale volume. It also included $1.1 billion in negotiated transactions.

Another $0.360 billion in home-equity loans was originated, building on the $0.312 billion closed in the first three months of 2012. In the year-earlier quarter, HEL volume was $0.307 billion.

Mortgage production is positioned to continue strengthening based on new loan applications, which climbed to $66.9 billion from the first quarter’s $59.9 billion.

The banking behemoth reduced its third-party servicing portfolio to $860.0 billion from $884.2 billion at the end of March. The portfolio stood at $940.8 billion as of June 30, 2011.

Chase owned $187.101 billion in real estate loans, trimming the investment portfolio from $192.401 billion three months earlier and reducing it from $209.947 billion a year earlier.

The June 3 number included $94.700 billion in HELs, $77.997 billion in prime mortgages and $13.729 billion in subprime mortgages.

Delinquency of at least 30 days, excluding purchased credit-impaired loans, fell to 5.16 percent from the first quarter’s 5.32 percent. The rate was 5.98 percent as of June 30, 2011.

On the purchased credit-impaired portion of the portfolio, the 30-day rate improved to 21.38 percent from 21.72 percent and was 26.20 percent in the second quarter of last year.

Repurchase liability fell to $3.293 billion from $3.516 billion as of March 31 and $3.631 billion at the same point last year.

After receiving $1.5 billion in new repurchase demands during the second quarter, outstanding demands finished the quarter at $3.5 billion.

Net income for mortgage production and servicing was $604 million, up from the first quarter’s $584 million and swinging from a $649 million loss in the same period last year.

Within retail financial services, net income climbed to $2.3 billion from $1.8 billion and soared from $0.4 billion in second-quarter 2011.

CIO trading losses from hedging activity by the infamous “London Whale” came in at $4.4 billion. The adverse activity, which rocked the investment world and garnered negative publicity for the venerable financial services giant, prompted the company to release several additional investment reports with its regular earnings data and hold a two-hour earnings call. It also prompted the closing of the CIO synthetic credit group, the firing of executives at the unit and the claw back of bonuses.

“Since the end of the first quarter, we have significantly reduced the total synthetic credit risk in CIO — whether measured by notional amounts, stress testing or other statistical methods,” JPMorgan Chairman and Chief Executive Officer James Dimon said in the report. “The reduction in risk has brought the portfolio to a scale that allowed us to transfer substantially all remaining synthetic credit positions to the investment bank.”

Income at all of JPMorgan before income tax expense was $7.0 billion, unchanged from the first quarter and down from $8.1 billion during the same three months in 2011.

Chase trimmed its mortgage staffing to 49,535 from 50,106 at the end of the first quarter. But staffing has been beefed up from 43,060 a year earlier.

As of the end of the second quarter, retail financial services staffing stood at 134,380, a little more than 134,321 three months earlier. Staffing has expanded from 122,728 at the same point last year.

Across all business lines, headcount climbed to 262,882 from 261,453 and has grown from a year earlier, when the company employed 250,095 people.

Consumer branch count inched up to 5,563 from 5,541 at the end of March.

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