Chase settles $4B with homeowners

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JPMorgan Chase and the Justice Department reached a $13 billion settlement over the sale of troubled mortgage-backed securities that contributed to a market collapse in 2008.

About $4 billion of the settlement will go to underwater homeowners, potential homebuyers in distressed areas of the country and those “harmed by the unlawful conduct of JPMorgan, Bear Stearns and Washington Mutual,” the DOJ says.

How big is your slice? Unknown

JPMorgan Chase has until 2017 to provide $4 billion in relief to homeowners. But the company plans to complete the commitment by the end of 2016, Chief Financial Officer Marianne Lake said during a conference call with investors on Tuesday after the settlement was announced.

The bank did not provide details on which borrowers would be eligible for relief. Lake says the relief will include principal forgiveness, loan modification and lending to low- and middle-income borrowers.

Worth multiple London Whales

This is the largest settlement between the government and a single company, and it was part of President Barack Obama’s Financial Fraud Enforcement Task Force. In addition to the $4 billion in relief to homeowners, the settlement includes:

  • $2 billion in a civil monetary penalty.
  • $4 billion in payments to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, for alleged loan losses.
  • $3 billion in payments to the Federal Deposit Insurance Corp., the National Credit Union Administration, and several state attorneys general.

JPMorgan Chase says it did not admit to any violations of the law as part of the global settlement.

What’s another word for ‘misrepresentations’?

The DOJ says that “as part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public — including the investing public — about numerous RMBS [residential mortgage-backed security] transactions.” The settlement does not absolve the lender or its employees from facing any possible criminal charges, the DOJ noted in a press release.

Thus do they all

“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” said Attorney General Eric Holder.  “JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior.”