JPMorgan Chase signs $13 billion agreement with Government

Reuters reports that JPMorgan Chase and Company are expected to sign a $13 billion agreement with the United States government on Tuesday. The billion dollar deal will settle claims with 21 major institutional investors over mortgage-backed securities sold to them before the national financial crisis. The payments will be made because JPMorgan Chase overstated the “quality of mortgages sold to investors” during the housing boom.”

The government, which has tried to hold banks responsible for much of the housing crisis, has been negotiating with JPMorgan Chase, the largest U.S. bank, for weeks. The civil suit, once settled, will end weeks of what has been termed as tense negotiations.

Unfortunately, even after the settlement is finalized, it won’t be the end for JPMorgan Chase which is going to have to complete an additional nine government investigations. According to Reuters these investigations will include topics such as “hiring practices in China to whether it manipulated the Libor benchmark interest rate.”

A tentative agreement had been reached in mid-October, but the government and Chase had been attempting to complete the details for the past month. The terms of the agreement, which include a $4 billion relief package, has been tentatively approved by the U.S. Justice Department and U.S. Department of Housing and Urban Development.

Negotiations between JPMorgan Chase and the Justice Department were initiated last year after the completion of an investigation by the Justice Department who decided that the bank did in fact break United States civil laws. The investigation included the review of mortgage bonds the bank had sold from 2005 through 2007.

What are the terms of the deal JPMorgan Chase deal?

 

JPMorgan Chase is expected to write down as much $1.5 billion for the value of loans on its books, effectively forgiving some borrower debt. An additional $500 million will be used to adjust the terms of some of the loans, effectively lowering the monthly payments.

The remaining balance, which is estimated at $2 billion, would help other home owners, most of whom borrowed money for low and moderately priced homes. Chase will also help support efforts in cities which were hit the hardest during the housing crisis by helping provide funds to demolish abandoned homes.

What the deal will not cover

 

Although the deal will cover 330 residential mortgage-backed securities trusts issued between 2005 and 2008 by the nation’s largest bank, it will not cover claims on similar trusts issued by Washington Mutual, the bank JPMorgan also acquired during the crisis.

JPMorgan Chase has stated this deal is an “important step in JPMorgan’s efforts to resolve similar mortgage-related matters.” They also hope that since the institutional investors have agreed to accept the settlement that the trustees will also do the same.

JPMorgan confirms it has set aside $23 billion in litigation reserves to cover settlements. The FHA also announced last month that they would pay money to resolve claims that they helped financed mortgages which may have been substandard. Their deal was for an estimated $5.1 billion.

 

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.