JPMorgan Chase & Co. Settlements with the US Department of Justice

The US Department of Justice announced on November 19, 2013 that JPMorgan Chase & Co. had agreed to a record-setting $13 billion settlement over its risky mortgage practices that played a role in the 2008 financial crisis. News of the historic agreement first broke on October 21, 2013, when a source close to the talks reported a breakdown of the $13 billion figure and that criminal prosecution of JPMorgan was still on the table. The report turned out to be true, as JPMorgan settled federal and state claims to the tune of $9 billion and to provide $4 billion in relief to unspecified consumers harmed by the risky mortgage practice. In addition, JPMorgan and its employees still faced the possibility of criminal charges. On February 10, 2014, the settlement agreement came under fire after non-profit financial reform group Better Markets sued the DOJ to block the $13 billion settlement from moving forward.

In addition to the November 2013 $13 billion settlement, JPMorgan has reached another substantial settlement agreement with the DOJ. On February 4, 2014, the DOJ announced that JPMorgan agreed to a $614 million settlement for defective mortgage loans that were ineligible for insurance under federal housing programs. The DOJ was not an original party to the lawsuit, which started in January 2013 after a whistleblower, Keith Edwards, sued JPMorgan under the False Claims Act[PDF]. News of the $614 million settlement came as a surprise because Edward’s suit remained secret until the DOJ announced the agreement in February 2014.

Bank of America Settlements with the US Department of Justice

In December 2011, Bank of America reached a $335 million settlement agreement with the DOJ over claims that its subsidiary, Countrywide Financial, used race instead of creditworthiness as the determinative factor in assigning minority borrowers sub-prime mortgages. As part of the agreement, BOA admitted to engaging in racially discriminatory practices from 2004 to 2008, which resulted in 200,000 minority borrowers facing a higher risk of foreclosure.

BOA faced a new lawsuit from DOJ on October 24, 2012 when US Attorney Preet Bharara filed a lawsuit against BOA alleging that BOA and Countrywide Financial committed fraudulent mortgage practices. A year later, a jury in the US District Court for the Southern District of New York found BOA liable for its fraudulent practices. The DOJ alleged similar claims in a lawsuit against BOA in the US District Court for the Western District of North Carolina from August 2013, stating that BOA misled investors about the level of risk associated with its residential mortgage-backed securities. Most recently, a New York state court validated a $8.5 billion settlement agreement between BOA and mortgage investors.