Chase Cuts Servicing Force as Pool of Distressed Borrowers Shrinks

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Nearly 1,000 mortgage banking employees have been or will be laid off from two JPMorgan Chase locations in New York, according to disclosures recently filed with the state's Department of Labor.

While Chase says the layoffs are the result of fewer borrowers entering delinquency and default, the notifications come at the same time that the monitor charged with overseeing banks' compliance with the servicing standards laid out in the national mortgage settlement reports that Chase failed to meet guidelines related to timely borrower communication and termination of forced-placed insurance policies.

The bank said in a June 7 notice that it will close a default operations call center and lay off 412 employees in Albion, located in western New York about 35 miles northwest of Rochester, on Sept. 9. According to Chase spokesman Thomas Kelly, the employees at the Albion call center handled tasks including collections and working with distressed borrowers to process loan modifications.

"The bottom line is that there are fewer people who are behind on their mortgages and we need fewer people to help them," Kelly said in an interview.

While Chase prepares to reduce headcount among the ranks of its loss mitigation and default servicing employees, it also admitted to failing to meet the terms of the national mortgage settlement. In the June 19 report that summarizes the results of the first wave of compliance testing, settlement monitor Joseph Smith wrote that during the first quarter of 2013, Chase failed to meet prescribed timelines for making a decision on a borrower's modification application and notifying the customer of its denial decision.

The reports adds that during the fourth quarter of 2012, Chase failed to terminate force-placed insurance coverage within 15 days of receipt of evidence of existing coverage, forcing the bank to refund premiums to more than 2,000 borrowers.

Diane Thompson, a consumer advocate who serves as of counsel to the National Consumer Law Center, questions the timing of the staff reductions, particularly in light of the settlement monitor's findings.

"It clearly indicates that Chase doesn't have the commitment toward providing high-quality default servicing, because they don't have it underhand and they're just reducing staff," Thompson said. "What this augurs for consumers is that things are not going to get better with Chase anytime soon."

In a regulatory filing, JPMorgan says that for every completed foreclosure, it has prevented two more through loan modification, short sales and other means, since the third quarter of 2010. And Kelly maintains that Chase has improved servicing processes and the bank can sustain those enhancements with a reduced workforce because of the declining number of distressed borrowers.

"In terms of how we as an industry are doing, we do have single point of contact, we do have better technology. We have more experience in doing this and we track them better," Kelly said. "There are people that still need help, that's true, and we are helping them. But it's nowhere near the same size."

The Albion layoffs follow the layoff earlier this year of 529 employees that performed work for the independent foreclosure review out of an office in Brooklyn. The review, led by the Office of the Comptroller of the Currency, has been criticized as being disorganized, ineffective and inconsistent and was halted in January in lieu of an estimated $10 billion settlement with large servicers.

"We basically staffed up to provide the information to the independent outsiders who made the judgment," Kelly said. "We had to collect all the information and give it to them. Once that process ended, those were temporary employees; they knew that was the deal."

At the same Brooklyn office, seven "Default Control Business Unit" employees were laid off on June 4 and Chase plans to lay off 35 "Originations Operations" employees on Sept. 4. The disclosures are required under the federal and state Worker Adjustment and Retraining Notification, or WARN, regulations.

Chase took over the Albion facility when it acquired Washington Mutual in 2008. The bank recently held two job fairs in Albion, one for internal positions at other Chase locations and a second one opened to local businesses, including one that plans to hire as many as 150 Chase staffers.

"It's a tough situation to not need these employees, but we're happy to work with them and work with other employers to help them find various jobs in the market," Kelly said.

The layoffs are among the first in what will eventually be the elimination of up to 15,000 mortgage-related jobs by the end of 2014. Chase eliminated 868 jobs and shut down a mortgage office in Florence, S.C., over the course of two rounds of layoffs earlier this year, state records show.

A Chase mortgage office that employed 400 people in Tampa, Fla., was also recently closed. And in February, Chase sold a mortgage servicing operation that employed more than 400 people in Melbourne, Fla., to Wingspan Portfolio Advisors, a Dallas-based specialty servicer.

"We continue to work through what's the right number and where should those shops be…We want to make sure that we enough staff to handle our customers' needs," he said.

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