A year ago, JPMorgan Chase & Co. had just set a U.S. banking profit record, but the leaders of one of its most quintessential businesses were far from riding high.

“Early 2019 was a depressing time for a lot of us,” Robert Segnini, head of retail and consumer direct mortgage underwriting, told employees at an internal town hall this month. “There was no real path forward, and we didn’t see a way to make money into 2020.”

The company had hemorrhaged about $850 million in 2018 originating home loans through its retail channel, Segnini said, according to people who heard the remarks. Last year, cost cuts and a drop in interest rates helped spur a recovery, allowing executives to privately predict that 2020 would finally mark a comeback.

“We could go from, over a two-year period, losing almost a billion, to breaking even, to kind of making $300-plus million,” Segnini said. “The economy is working for us in 2020. How do we capitalize on that and have a blockbuster year?”

With interest rates and unemployment at rock-bottom lows and home values rising, the part of JPMorgan’s retail business that sells home loans to consumers -- either when they walk into a branch, or when they call in or apply online -- made money last month, marking the first profitable January in five years, the people said, asking not to be identified discussing internal numbers.

The bank’s home-lending business sits within the consumer bank and is comprised of three parts: mortgage originations, mortgage servicing and portfolios of real estate loans kept on the bank’s books. As a whole, the home-lending unit has been profitable every year for at least five years, according to company spokeswoman Trish Wexler, who declined to discuss origination earnings. JPMorgan reports revenue for the business, but not profits and losses.

‘Feel Great’

“Our strategy has been clear over the last five years -- to build a high-quality, lower-risk business for this really important product for our customers,” Wexler said in an email. “We feel great about our progress and are exactly where we want to be now. We’ve built a solid foundation with great digital experiences that we’re deploying at scale. We have all the elements in place now to make us optimistic about 2020 and beyond.”

The bank said in a presentation for its investor day Tuesday that it was “focused on reducing our origination costs” and that it already cut expense per loan by 18% last year.

Still, the past weakness in origination reveals the extent of the bank’s struggles in a business that has repeatedly drawn the ire of Chief Executive Officer Jamie Dimon. Clumsy regulation has made it harder for banks to lend and costlier for aspiring homebuyers hoping to get into the market, Dimon has said in speeches and letters to shareholders. JPMorgan’s economists estimated that a “properly designed” lending industry could have generated more than $1 trillion in additional loans, Dimon said last year.

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