JPMorgan Reportedly Near $13 Billion Mortgage Settlement With Gov’t

Your News Companion by Ben Mathis-Lilley
Nov. 18 2013 8:54 PM

JPMorgan Reportedly Near $13 Billion Mortgage Settlement With Gov’t

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A woman leaves JP Morgan Chase & Company headquarters in New York.

Photo by EMMANUEL DUNAND/AFP/Getty Images

JPMorgan has reportedly reached a settlement with the Justice Department over the bank’s questionable practices in its handling of mortgage-backed securities in the run up to the 2008 financial crisis. The deal, which could be announced as early as Tuesday, will require the country’s largest bank to pay more than $6 billion in compensation to investors, $4 billion to consumers, as well as paying the remainder of the settlement as a fine, according to the Associated Press.

Here’s a more detailed breakdown of where the settlement money could be headed from the Washington Post.

A person familiar with the talks said at least $1.5 billion of consumer aid will go to reduce home-loan payments for borrowers whose mortgages are higher than the value of their homes, or under water. And $300 million must go toward other forms of forbearance, such as forgiving a portion of the loan until a later date to reduce payments now and increase the odds that borrowers will be able to remain in their homes.
The other half of the money can be used for an array of restitution to help other borrowers or communities hard hit by the mortgage crisis. Among the options: JPMorgan could lower interest rates on existing loans, or it could originate new loans to low- and moderate-income borrowers loans it would be forbidden from selling to investors and forced to keep on its books to encourage responsible lending.
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The settlement would be the largest in U.S. history between a corporation and the government, but $13 billion would only amount to half of JPMorgan’s record 2012 income of $21.3 billion. According to the AP, “mounting legal costs from government proceedings pushed JPMorgan to a rare loss in this year's third quarter, the first under CEO Jamie Dimon's leadership. The bank reported Oct. 11 that it set aside $9.2 billion in the July-September quarter to cover the string of legal cases against the bank. JPMorgan said it has placed $23 billion in reserve to cover potential legal costs.”

The company has until the end of 2016 to comply with the terms of the agreement.

Elliot Hannon is a writer in Washington, D.C. Follow him on Twitter.

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