JP Morgan Chase Settles Toxic Mortgage Claim for $13 Billion
Recently, JP Morgan Chase finally settled a lawsuit alleging that they had sold bonds backed by “toxic” residential mortgages between 2005 and 2008, and misled investors in the process. The settlement amount, $13 billion, includes a $2 billion fine paid to the Department of Justice (“DOJ”).
Additionally, a portion of the funds will be used for homeowner relief. Specifically, $500 million are earmarked for loan modifications, and $1.5 billion are meant to be used for principle reductions. $2 billion are set aside to forgive the principal balances on homes that are vacant but are not foreclosed yet, to demolish deserted homes, and to assist low and medium-income borrowers who are trying to finance a purchase. $100 million is coming to Illinois, and other states will divvy up close to $1 billion. The bank has until 2017 to complete the delivery of relief to homeowners and borrowers.
Much of the rest of the money will go to the various regulatory agencies involved, such as state attorney general offices and the Federal Housing Finance Agency, among others.
According to the DOJ, JP Morgan Chase repeatedly misled investors and sold them loans, even when the loans did not meet internal guidelines. The DOJ has insisted that the settlement does not relieve the bank’s employees of wrongdoing or potential criminal actions.