JPMorgan Chase & Co. said Tuesday that it would shut down what remains of its wholesale mortgage channel on Friday.
"We have decided to focus on loan originations through Chase bank branches, our consumer direct business, and other retail-originated loans," the company told employees in an e-mail, a copy of which was obtained by American Banker. "We are exiting the broker business that originates loans through brokers and, in the correspondent business, will no longer purchase loans originated by brokers." The company said it would continue to buy loans that correspondents originate directly.
Christine Holevas, a spokeswoman for the New York banking company, said it has decided to focus on retail originations because "customers like to work directly with their mortgage officers and we have found that default rates are significantly lower."
JPMorgan Chase's purchase of Washington Mutual Inc.'s banking operations last year also contributed to the decision to focus on direct originations, Ms. Holevas said. The purchase added more than 2,000 bank branches to JPMorgan Chase's network of 3,000. The company also has about 300 retail mortgage branches (Wamu had none at the time it was taken over.)
JPMorgan Chase began retreating from the wholesale channel in May, when it stopped offering subprime and home equity loans through brokers. Three months later, it also stopped offering nonagency jumbo mortgages through brokers. And in September JPMorgan Chase announced it would close four of its eight wholesale mortgage operations centers by yearend.
Ms. Holevas said Tuesday that as many as 800 employees may be laid off because of the channel closing. However, "we don't think it's going to be that" many, she said, because the company's refinancing volume has tripled and its surviving mortgage businesses need underwriters and other employees. "We're redeploying talent," she said. She would not say what would happen to the four remaining wholesale mortgage operations centers.
Many other lenders have shuttered their wholesale channels in the last two years, including HSBC Holdings PLC's U.S. consumer finance unit.
National Mortgage News has reported that JPMorgan Chase was the largest wholesaler in the third quarter. It funded $5.965 billion of loans through brokers during the quarter, edging out Wells Fargo & Co., which did $5.907 billion through the channel.
JPMorgan Chase's quitting the wholesale business is "going to have a big impact on the industry," said David Olson, the president of Access Mortgage Research and Consulting Inc. " 'Can the channel stay alive?' is still a big question."
Another question, he said, is, "Will anyone else drop out based out on this, or will others use this as an opportunity to expand? There's a lot of pressure on some of the big players whether they can hang in there."