Chase Home Equity - Wholesale - Wholesale 2nds

In a conference call to its Home Equity and Subprime Wholesale divisions today, Chase announced the discontinuation of all products for those divisions and told employees it was shutting down both channels. "Third party origination of Home Equity and Subprime is totally done - elimination of channel and product, so no product migration to Prime Wholesale," a source told us.

It is not yet known how many in total will be affected by layoffs. A call scheduled for the Prime Wholesale division later today may result in "some sort of downsizing there also," our source said. More information to come.

Original Ailing/Watch Listing - 2008-02-05: We've seen this pattern played out time-and-time again: squeeze the guidelines; downsize the staff; cut the LTV's. We are hearing the Home Equity division is being absorbed into the broader Wholesale Channel.

JP Morgan's Chase Home Equity (CHE) looks like it's still there, but looks can be deceiving. As of the date of this writing, there are 6 Area Managers covering the entire country per their web site (although one has a disconnected phone number). A tipster wrote in that "the HE division has merged under the umbrella of Home Mortgage which now encompasses Prime, HE and Subprime." Another source we spoke with confirmed 63 AE's remain, and the target is to have 1 or 2 left for each State. Yet another states they are now down to 25 AE's nationwide. That translates into yet more layoffs or internal transfers according to our math.

J. P. Morgan Chase reported home-equity originations totaled $9.8 billion in the fourth quarter, down about 30% for the same period last year. But the full story is not just about declining originations, but loan performance: "Our consumer home equity and subprime loan portfolios performed worse than we expected," said Jamie Dimon, CEO, in a press release.

Chase has been following the trend of other major lenders by cutting back or eliminating Home Equity lending in certain markets. Fortune reported on 2008-02-04 that Chase, like Countrywide, has sent notices to California customers regarding their home equity lines of credit:

"Right behind Countrywide was Chase Home Lending, which notified borrowers in Los Angeles, Imperial and Orange Counties that they could tap their credit lines for no more than 70% of the value of their house. Previously, the limit had been 90%."

California isn't the only state where CHE has cutback on lending. According to rate sheets available on their web site, one or more counties in 17 other states are now subject to an additional reduction of CLTV's ranging from 5% to 10% below the now reduced national limit.

The L.A. Times reported on Chase's retracting from home equity lending on 2008-02-01:

"Through this week, Chase customers in California can tap as much as 90% of the equity in their homes. Starting Monday, however, that limit goes down to 85% in most of the state. In six counties, including three in Southern California -- Los Angeles, Orange and Imperial -- Chase won't let homeowners borrow more than 70% of the value of their homes. The bank wouldn't say how the six counties were chosen...

Chase is still assessing whether to rescind existing lines of credit, he said."

Info is still coming in, so we'll keep you posted! If you can provide us with details or corrections, please email us.

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