JPMorgan agrees to $13 billion settlement over mortgages

The deal includes:

i)  $9 billion in payments to authorities and

ii) $4 billion in relief to consumers – mainly homeowners 


November 19, 2013

JPMorgan Chase & Co. has agreed to a record $13 billion settlement over mislabeled mortgage securities that federal and state authorities said stoked the financial crisis, the Department of Justice announced Tuesday.

The deal includes $9 billion in payments to authorities and $4 billion in relief to consumers – mainly homeowners – harmed by the conduct of JPMorgan and the two failed banks it took over during the crisis, Bear Stearns and Washington Mutual.

The bank "acknowledged it made serious misrepresentations to the public – including the investing public" over the quality of residential mortgage-backed securities (RMBS) it sold ahead of the financial crisis, the Justice Department said in a statement.

As the housing market collapsed between 2006 and 2008, millions of homeowners defaulted on high-risk mortgages. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages. Those securities were sold by JP Morgan and other big Wall Street banks.

"Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," Attorney General Eric Holder said. 


"JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm's behavior."

Goldman Sachs, Citigroup and other big banks have similarly been accused by the Securities and Exchange Commission (SEC) of deceiving investors in sales of mortgage securities in the runup to the crisis. Together they have paid hundreds of millions in penalties to settle civil charges brought by the SEC.


Record-setting penalty


The agreement eclipses the previous record government fine of a private corporation and resolves a major part of a series of complaints against the largest U.S. bank over mortgage securities that caused huge investor losses.

The agreement announced Tuesday clears most of the civil allegations over mortgage securities against the banks. However, the Justice Department said the deal still does not absolve the bank or its employees from possible criminal charges.



Consumer relief


The complex deal includes claims and penalties to be paid to the Justice Department, the National Credit Union Administration, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency (FHFA) and the states of California, Delaware, Illinois, Massachusetts and New York.

The $4 billion for consumer relief requires JPMorgan to forgive some of the principal on many customers' loans and modify others to improve conditions for borrowers. 







 

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 Link: http://america.aljazeera.com/articles/2013/11/19/jpmorgan-agrees-to13bdealformortgagemisdeeds.html