JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) beat first quarter earnings expectations Friday with the help of rising mortgage revenue, but the weak housing market could drag down future gains for the two big banks.

Investors are undoubtedly aware of the risk. In late Friday trading, shares of JPMorgan Chase were down $1.64, or 3.66 percent, to $43.20. Wells Fargo was down 1.07 cents, or 3.15 percent, to $32.94.

New York-based JPMorgan Chase said mortgage application volume rose 33 percent in the first quarter, compared to the previous year. Its mortgage origination value rose 6 percent to $38.4 billion.

We originated more than 200,000 mortgages in the first quarter. To help struggling homeowners, we have offered more than 1.3 million mortgage modifications since 2009, and completed more than 490,000, said Jamie Dimon, JPMorgan Chase's chairman and CEO, in a statement.

However, with respect to our Mortgage Banking business, we expect to see elevated levels of costs and losses associated with mortgage-related issues for a while longer, he added.

Dimon has previously said that he believes housing prices are near a bottom. But in January, during JPMorgan's fourth quarter conference call, Dimon said there's no one really in charge of the housing market, citing foreclosure delays, uncertainty surrounding mortgage giants Fannie Mae and Freddie Mac and other legislative issues.

On top of its regular expenses, Chase had a $2.5 billion pre-tax expense, or 39 cents per share reduction in earnings after taxes, for lawsuit costs related to mortgages. The bank was involved with four other major lenders, including Wells Fargo, in a $26 billion settlement with 49 states announced in February.

San Francisco-based Wells Fargo, the fourth largest bank, has become the largest mortgage lender in the country, and its originations rose to $129 billion in the first quarter from $75 billion in the same period last year, leading to an overall 20 percent revenue increase.

Although multifamily rentals remain robust, the combination of rising rents and low mortgage rates should help home sales rebound, Wells Fargo CEO John Stumpf said in an earnings call Friday. We're getting very close to the tipping point, he said.

While ramping up their mortgage businesses, two banks have undoubtedly benefited from the woes of Bank of America Corp. (NYSE: BAC) and Citi (NYSE: C), which have cut their mortgage units as they struggle to process subprime loans that date back to before 2008. Last year, JPMorgan surpassed BofA as the largest U.S. bank by assets last year as the Charlotte, N.C.-based bank began cutting divisions in an attempt to reduce expenses.

BofA has also been involved in a spat with Fannie Mae over mortgage repurchases. The bank has the most outstanding repurchase requests for mortgages that Fannie claims didn't conform to underwriting standards, which date back to before BofA's acquisition of subprime lender Countrywide. Because of the disagreement, BofA stopped selling mortgages to Fannie in February.

It isn't the first time JPMorgan and Wells have capitalized off weakened rivals: JPMorgan bought Bear Sterns for a bargain as it collapsed from subprime losses in early 2008, and Wells Fargo consumed Wachovia at the height of the crisis.

But for JPMorgan and Wells -- and all the banks, for that matter -- to continue to reap profits from mortgages, Americans must continue to buy homes. And despite historically low interest rates, underwriting standards remain tight, which has dampened sales activity. Recent job data has come in below expectations, and income growth remains stagnant. Fallout from the euro zone crisis and slowing growth from China and India puts more pressure on the American economy.