JP Morgan Reaches a Tentative Agreement on the Issue of Mortgage Bonds

Banker Resource
October 24, 2013 — 1,393 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

JPMorgan Chase & Co. and the Department of Justice have agreed on a tentative resolution on all the matters related to civil mortgage-bonds. Under this agreement, JPM will have to pay a record amount of $13 billion to the Department of Justice. The amount was initially said to be $11 billion but after negotiations Department of Justice managed to convince JPM in giving away $13 billion.

This tentative accord was recently agreed upon after telephonic conversations between Stephen Cutler who is the General Counsel of JPMorgan, Eric Holder who is the U.S. Attorney General, Chief Executive Officer of JPM, Jamie Dimon and Tony West Associate--U.S. Attorney General.

JPM to Pay $13 Billion

This $13 billion includes an accord of $4 billion with Federal Housing Finance Agency taking into consideration the deal of mortgage-backed securities by the bank. The act has not been finalized yet and does not include any release on the bank claiming potential criminal liability.

Acting by the proposed accord, the bank will probably have to cooperate in all the criminal investigations of the people accused of being involved in wrong doings related with the mortgage practices of the bank. The proposed deal also includes inquires that are pending by Eric Schneiderman, New York Attorney General.

JPMorgan is also being investigated for its hiring practices in branches in Asia. It has tapped around $8 billion out of the $28 billion reserve kept aside since 2010 for covering its legal expenses.

Other Charges Against JPM

The FHFA has sued 17 other banks along with JPM two years ago with the charge of faulty mortgage bonds in an attempt to recover certain losses that taxpayers were forced to pay when the government took charge of the weakening mortgage companies in 2008. The FHFA had accused JPM as well as its affiliates for changing the material facts and making incorrect statements in selling mortgage bonds of $33 billion to Freddie Mac and Fannie Mae from September 2005 to September 2007.

Apart from these allegations, JPM is also being subject to a criminal investigation by US prosecutors. This increase in the number of lawsuits and investigations against the company forced it to take around a $7 billion charge in its third quarter. This resulted in the first ever loss for the bank under the leadership of Dimon. So far the company has paid around $1 billion to five regulators to settle down the allegations. These allegations involve around $6 billion trading loss of last year.

Banker Resource