JPMorgan Chase & Co. (JPM) [corporate website] will pay the US government $614 million and improve company mortgage lending practices under a settlement announced Tuesday for claims it approved thousands of unqualified home mortgage loans for government insurance since 2002 and cost the government millions of dollars when the loans defaulted. As part of the settlement, JPMorgan admitted [Reuters report] that it approved thousands of insured loans that were ineligible for insurance by the Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) [official websites]. "For years, JPMorgan Chase has enjoyed the privilege of participating in federally subsidized programs aimed at helping millions of Americans realize the dream of homeownership," US Attorney for the Southern District of New York Preet Bharara said in a statement [text] released by the Department of Justice (DOJ) [official website].
Yet, for more than a decade, it abused that privilege. JPMorgan Chase put profits ahead of responsibility by recklessly churning out thousands of defective mortgage loans, failing to inform the government of known problems with those loans and leaving the government to cover the losses when the loans defaulted. With today's settlement, however, JPMorgan Chase has accepted responsibility for its misconduct and has committed to reform its business practices. This settlement adds to the list of successful mortgage fraud cases this office has pursued.The settlement was filed in US District Court for the Southern District of New York [official website], and approved by Judge J Paul Oetken.
JPMorgan has been under intense scrutiny by US government agencies in the aftermath of the sub-prime mortgage crisis. In November, the DOJ finalized [JURIST report] a $13 billion civil settlement with JPMorgan that resolved federal and state claims arising from the bank's risky mortgage practices that helped lead to the 2008 financial crisis. In August the company disclosed [JURIST report] in its quarterly filing with the Securities and Exchange Commission (SEC) [official website] that it is being investigated by both the civil and criminal divisions of the US Attorney's Office for the Eastern District of California (EDC) [official website] over sales of mortgage-backed securities to investors leading up to the sub-prime mortgage crisis. JPMorgan's disclosures came one day after the DOJ filed suit [JURIST report] against Bank of America (BOA) [corporate website], claiming the corporation misled investors about securitized loans worth more than $850 million. In an announcement earlier that week, Attorney General Eric Holder remarked [press release] that the suit against BOA prove that the Financial Fraud Enforcement Task Force [official website] is taking an aggressive approach to uncovering abuses in the residential mortgage-backed securities market.