JPMorgan to pay $614mn to settle US mortgage fraud case
Bank admitted it defrauded federal agencies by underwriting sub-standard mortgage loans
Wednesday 05 February 2014
JPMorgan Chase has agreed to pay the US government $614 million (£376m) after admitting that it defrauded federal agencies by underwriting sub-standard mortgage loans.
JPMorgan, the largest US bank by assets, said as part of the settlement that for more than a decade it approved thousands of insured loans that were not eligible for insurance by the Federal Housing Administration or the Department of Veterans Affairs, according to court papers.
As a consequence, "both the FHA and the VA incurred substantial losses when unqualified loans failed and caused the FHA and VA to cover the associated losses," the US Justice Department said in a statement.
JPMorgan is one of several banks that has faced similar allegations. Citigroup and Deutsche Bank have also reached settlements, while the Justice Department is seeking $2.1 billion (£1.29bn) in penalties from Bank of America after a jury found the bank liable for fraud over mortgages sold by its Countrywide unit.
Last year, JPMorgan agreed to about $20 billion (£12.25bn) in settlements in its drive to clear up legal claims. The deals covered claims over other mortgage issues, as well as derivatives and power trading.
The bank said in a statement that the "settlement represents another significant step in the firm's efforts to put historical mortgage-related issues behind it."
It added that it has already recorded reserves for the settlement and does not expect the deal to have any significant additional financial impact.
The settlement with the Justice Department began with a whistleblower, Keith Edwards, who sued JPMorgan in January 2013 under an anti-fraud law known as the False Claims Act. The law allows individuals to sue government contractors and suppliers for defrauding taxpayers. Whisteblowers can keep a slice of the penalty if successful.
It has not been determined what Edwards' share will be, according to court papers. The existence of his suit was sealed until Tuesday.
In other recent legal claims, JPMorgan on Monday agreed to pay $1.45 million (£890,000) to settle four-year-old allegations brought by the US Equal Employment Opportunity Commission that the bank had maintained a sexually hostile environment for women in a mortgage loan center on Ohio.
On Tuesday a federal bankruptcy judge approved the bank's $543 million (£332.5m) deal to end two private lawsuits stemming from its relationship with convicted Ponzi scheme mastermind Bernard Madoff. Last month, the bank separately agreed to pay more than $2 billion (£1.22bn) to settle criminal charges related to the Madoff fraud.
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