The Securities and Exchange Commission pressed JPMorgan Chase & Co. to tell investors more about mounting demands to buy back defective mortgages, an obligation that cost the four biggest U.S. lenders about $5 billion last year.
The SEC asked the company to disclose more about reserves set aside to cover the cost of repurchasing bad loans it sold to Fannie Mae, Freddie Mac and other investors, according to a Jan. 29 letter released Thursday. The SEC also told JPMorgan Chase to provide more details on when and how it recognizes losses on mortgages that have been modified as well as on soured credit card debt.
Fannie and Freddie asked the bank to repurchase $2.7 billion in defective loans in 2009 and $1.4 billion in 2008, JPMorgan Chase said. It held $2 billion in reserves at the end of the first quarter against future buyback requests.
Of the total requested, it repurchased $1.1 billion in defective loans in 2009 and has offered more than 750,000 borrowers trial modifications to try to "cure" their delinquent loans, JPMorgan Chase had said in a filing. About 127,000 received permanent repayment plans.
JPMorgan Chase told the SEC that 75% of its current repurchase requests stem from loans originated in 2007 and 2008 and that it is able to file claims against third-party originators on 40% of all repurchase requests. The SEC questioned JPMorgan Chase's calculations for its allowance for loan losses, relating to breaches in the agreements it has with Fannie Mae, Freddie Mac and other mortgage investors.