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JP Morgan Close to $13 Billion Mortgage Settlement

The federal government and one of the biggest names in banking are close to reaching a settlement in mortgage-securities litigation.

JPMorgan has tentatively agreed to pay approximately $13 billion to settle civil cases pending with the Federal Housing Finance Agency, the Justice Department and the New York Attorney General. Lawyers for the banking giant and the U.S. government agreed in a phone call late Friday night to the settlement.

JPMorgan was investigated for allegations surrounding its handling of the mortgage-backed securities it sold preceding the 2008 housing crash. The financial meltdown and subsequent housing crash plunged the U.S. economy to its lowest level since the Great Depression.

An anonymous source said that Attorney General Eric Holder told JPMorgan lawyers in the Friday night phone call that a “non-prosecution agreement was a non-starter” , which means the Justice Department will continue its criminal investigation into the bank’s handling of mortgage-backed securities between 2005 and 2007. The criminal investigation into the bank’s conduct is being handled by Sacramento, California, federal prosecutors.

Investors who bought mortgages sold as securities lost billions of dollars when the housing bubble burst in the late 2000’s, and they, as well the public, were outraged when no executives saw jail time. A government probe began in 2012 when a task force of federal and state officials was organized to investigate the handling of mortgage-backed securities.

JPMorgan is not the first big bank to be accused of mortgage-backed security abuse. Goldman Sachs, Bank of America and Citigroup have previously been accused of abuses in the sale of security backed mortgages in the years preceding the financial crisis in this country. In the past, the banks in all Securities and Exchange Commission (SEC) litigation cases did not admit or deny any wrongdoing although they paid hundreds of millions in penalties for deceiving investors.

Of the $13 billion settlement, approximately $4 billion is earmarked for FHFA to resolve outstanding issues, and another $4 billion will be placed into a consumer-relief fund. The remainder of the settlement would go to the Justice Department and the State of New York.

Original story found here.