Greg Beliles, correspondent lending head at JPMorgan, wrote through a spokeswoman that the bank works with "experienced, well managed and high quality" lenders. Bank of America's concerns may stem from its experience with Countrywide Financial, which Bank of America bought in 2008, the largest correspondent lender in the U.S. at the time.
Countrywide failed at least in part due to bad loans that it bought from correspondent banks and could not sell back to them. The Countrywide deal has been a huge millstone for Bank of America—the bank has paid some $70 billion in settlements and legal penalties linked to the financial crisis, much of which came from its acquisition of the lender.
Other lenders had trouble with correspondent loans during the crisis. Residential Capital, once the mortgage arm of Ally Financial, filed for bankruptcy in 2012, in part because of its exposure to correspondent lenders that were not able to make good on claims. Ally is the successor firm to GMAC, the car financing arm of General Motors.
JPMorgan said it reviews every loan it buys in detail. That attention gives it a "very high degree of confidence in the loan quality we are purchasing," JPMorgan's Beliles wrote in his email.
He said JPMorgan keeps the bulk of mortgages it buys from other lenders on its balance sheet, rather than bundling them into bonds and selling them to investors. Banks like JPMorgan may be dialing up their risk taking a bit, but there is little evidence of a new bubble forming.
While a few small lenders are creeping back into products like subprime mortgages, bigger banks are by and large avoiding them. Delinquency rates on single family mortgages, which peaked at 11.26 percent in the first quarter of 2010, have declined fairly steadily ever since and stood at 5.77 percent at the end of the second quarter, according to data from the Federal Reserve Bank of St. Louis. In the last crisis, delinquency rates started rising in 2004, and by the third quarter of 2007, a year before Lehman Brothers failed, reached 2.76 percent, their highest level in 14 years. Correspondent loans can bolster a bank's bottom line.