JPMorgan Works to Shed Consumer Loans

"We continue to worry about the Florida market," he adds. Over the long term, "it's a great place to do business, but short term we're going to see more stress out of the marketplace."

Scharf estimates that the number of loans where the company will be successful in loss mitigation efforts for Florida will be much lower than in other states because of a high amount of non-owner occupied properties.

On the loan modification front, JPMorgan Chase has completed roughly 280,000 trial loan modifications through Oct. 24, with another 98,000 in the process. The company is doing the loan modifications under the government's Home Affordable Modification Program as well as its own program, initiated in late October 2008, shortly before the government came out with its initiative.

Other big banks including Citigroup (C), Bank of America (BAC) through its purchase of Countrywide and Wells Fargo (WFC) through its purchase of Wachovia are also working to extend modifications to troubled borrowers.

Performance is an important focus. Scharf says most of the modifications made under these programs have been for decreases in payments, and that adjustments were made for the most troubled borrowers first. He added that 78% of the borrowers getting modifications have already made at least one payment on the new loan.

Banks, including JPMorgan, are having a hard time getting borrowers to provide the full documentation needed for these modifications, which extends and potentially hampers the process of making permanent changes. To date, only 26% of JPMorgan borrowers with trial loan modifications that have made three or more payments andprovided the full documentation.

"Next quarter will be interesting because the three-month [trial] period is up," Scharf said.

--Written by Laurie Kulikowski in New York.

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