JPMorgan closes in on €13bn US settlement over mortgage abuses
JPMorgan Chase was set to announce a $13bn (€9.6bn) agreement with the US government last night to settle claims it overstated the quality of mortgages sold to investors during the housing boom, sources said.
The settlement would mark the end of weeks of tense negotiations between JPMorgan Chase, the largest US bank, and government agencies that were under pressure to hold banks accountable for wrongdoing that led to the housing crisis.
Even after the settlement, the bank faces at least nine other government investigations, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate.
JPMorgan Chase and government agencies led by the Justice Department reached a tentative agreement in mid-October and have been hammering out details since then.
Earlier this week the bank and US government officials agreed to terms of a $4bn relief package that is part of the broader deal, paving the way for the full announcement. Of the $4bn, at least $1.5 bn is for the bank to forgive some borrower debt and $500m would go to change the terms of loans to lower monthly payments.
The remaining $2bn would go for assorted measures, including new loans for low and moderate-income borrowers in areas that have been hard hit by the housing crisis and for demolishing abandoned homes, a source said.
Last month the Federal Housing Finance Agency announced a related $5.1bn deal to resolve claims about the quality of mortgage bonds it sold, $4bn of which is part of the expected announcement.
JPMorgan's negotiations with the Justice Department began in earnest last spring after the department's lawyers reached a preliminary conclusion that the bank had violated US civil laws. The Justice Department had looked into mortgage bonds the bank sold from 2005 through to 2007.
Government lawyers had prepared to file a lawsuit against JPMorgan in September, and scheduled a news conference, but they cancelled it at the last minute as JPMorgan reached out to discuss a settlement.
The settlement is the most significant action to come out of a task force the Obama administration created in January 2012 to probe the packaging and sale of shoddy home loans.
Lawmakers and others have been critical of the administration's failure to hold Wall Street banks, executives, and other parties accountable for the excesses that resulted in the housing crisis.
The task force included representatives from the Justice Department and the US Securities and Exchange Commission, among others.
The agencies worked together unusually closely on the lawsuits. Investigators from the inspector general's office at the regulator of Fannie Mae and Freddie Mac helped to build the cases. (Reuters)