Tuesday, November 19, 2013

DOJ and JPMorgan Chase Agree to $13 Billion Settlment over Mortgage Practices

The United States Department of Justice and JP Morgan Chase have agreed to a settlement of several investigations of the bank resulting from risky mortgage practices.  The settlement results in fines, penalties, and monetary amounts totaling $13 billion.  This is the largest settlement that a single company has ever paid to the U.S. government.
 
The resolution was a civil settlement and does not end DOJ criminal investigations of former Chase employees who were responsible for marketing toxic mortgage backed securities to investors.  Observers believe that this is the first of a series of settlements with large banks involved with improper mortgage practices.  It sends the message that the settlement amounts will be far greater than the banks had previously anticipated.
 
A significant part of the settlement is that it included a statement of facts that essentially was a confession of wrongdoing by the bank.  It remains to be seen if this confession aids plaintiffs in private civil actions.  Additionally, the bank is obligated to cooperate in the further criminal and civil investigations of former employees.
 
The $13 billion settlement breaks into the following apportionment:  1) $2 billion fine to federal prosecutors in the Eastern District of California, 2) $4 billion in relief to homeowners harmed by the bank's illegal practices, and 3) $7 billion to compensate defrauded investors including the Federal Housing Finance Agency, which overseas Fannie Mae and Freddie Mac.  Those entities purchases billions in toxic mortgage securities and required a government bail out.
 
For more about the settlement, please see The New York Times, http://dealbook.nytimes.com/2013/11/19/13-billion-settlement-with-jpmorgan-is-announced/?hp.

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