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02-04-2014, 10:05 PM #1
J.P. Morgan to pay $614 MILLION in mortgage settlement
Feb. 4, 2014, 8:32 p.m. EST
J.P. Morgan to pay $614 mln in mortgage settlement
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By Christina Rexrode, MarketWatch
NEW YORK (MarketWatch) — J.P. Morgan Chase & Co. will pay $614 million to settle allegations that it misled the government about the quality of some of its mortgages, the U.S. government said late Tuesday.
The Department of Justice in Manhattan and other government agencies that J.P. Morgan JPM -0.09% “admitted, acknowledged and accepted responsibility for” submitting false claims to government agencies. According to prosecutors, the bank asked for government-backed insurance and refinancing for thousands of mortgage loans that were not eligible for either.
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When the “defective” mortgage loans defaulted, prosecutors said, the government incurred “substantial losses.”
The charges relate to two government programs, one by the Department of Veterans Affairs and another by the Department of Housing and Urban Development. If a bank submits a loan that is accepted into either program for insurance or refinancing, then the bank can ask the government to pay associated costs if the loan later defaults.
The government trusts the banks to submit only eligible loans. It does not review the loans before approving them for the programs, according to the DOJ. The government also relies on the banks to self-report which loans might be affected by fraud.
Prosecutors said J.P. Morgan regularly violated both of those rules, failing to self-report some 582 loans that it identified as being affected by fraud or other “material deficiencies.” Sometimes, when employees submitted loan data to a government software application and did not get the loan approved, they’d resubmit the same loans with “hypothetical data,” prosecutors said.
In a statement, J.P. Morgan said the settlement “represents another significant step in the firm’s efforts to put historical mortgage-related issues behind it.”
The bank also said it believes it is fully reserved for the settlement.
http://www.marketwatch.com/story/jp-...MW_latest_news
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