Reuters Investigates

Jamie Dimon: Good banker? Bad banker?

The U.S. mortgage business is a “mess” in need of overhaul, JPMorgan Chief Executive Jamie Dimon reckons.

(See our special report on Dimon today: “Jamie Dimon wants some R-E-S-P-E-C-T”)

Of course, his own bank is the third-largest U.S. mortgage lender. And JPMorgan is sitting on billions in not just prime mortgages, but risky home-equity loans too.

But Dimon has made a career out of being the one Wall Street banker who likes to stand up, stick up for his views and tell it as he sees it. He can talk in a way that resonates with the mood of the country. He can cross the divide between Wall Street and Washington D.C. And while his peers might talk about doing God’s work, Dimon will admit making mistakes.

The thing is, when you scratch the surface at JPMorgan, the bank doesn’t seem so different from its peers, with large consumer loan exposure and sometimes questionable business decisions. So what do you think? Does Dimon deserve your R-E-S-P-E-C-T?

Find the special report by Elinor Comlay and Matthew Goldstein in multimedia PDF format here.

The robosigning story goes on

Shares Lender Processing Services Inc fell as much as 9.8 percent at one point on Monday after Scot Paltrow’s special report said the company, which helps banks manage mortgage foreclosure documentation, faces more serious legal troubles than it previously disclosed. The stock closed 5.77 percent down for the day.

Read the full report, “Legal woes mount for a foreclosure kingpin,” in multimedia PDF format here.

This graphic shows how the company’s share price surged in 2009 as the company profited on the foreclosure boom.

How long can banks keeps ignoring home equity loans?

By Matthew Goldstein

The $425 billion in home equity loans and other second mortgages sitting on the balance sheet of the  four biggest U.S. commercial banks is the big gorilla in the room that no one wants to talk about. (See our latest special report here.)

The banks, for their part, generally have downplayed concerns about so-called second liens on mortgages. Bankers point out that less than 5 percent of home equity loans and other second mortgages are delinquent and lenders have been taking charge-offs for second liens deemed uncollectable.

But critics argue the banks are whistling past the graveyard in dealing with their large exposure to second liens and pinning too much on an economic rebound to keep these loans above water.  The critics say that with so many borrowers underwater on their primary mortgage, it is inevitable that banks will have to take writedowns on home equity loans, especially when the first loans are modified and reduced in size.

The big worry then is that any substantial writedowns by banks could eat away at precious capital they’ve built up since the financial crisis nearly brought many big lenders to the brink two years ago.

Also, housing experts suggest that until banks confront their second lien exposure, it will be hard to craft meaningful solutions to the mortgage mess and stem a wave of  foreclosures on financially-strapped borrowers.