UPDATE 2-JPMorgan to pay $614 mln in U.S. mortgage fraud case

Tue Feb 4, 2014 9:07pm EST

* JPMorgan agreed to pay $20 bln in 2013 to clear up legal claims

* U.S. prosecutor in Manhattan has brought 8 mortgage-fraud suits

By David Ingram and David Henry

WASHINGTON, Feb 4 (Reuters) - JPMorgan Chase & Co settled the latest in a string of legal claims on Tuesday when it agreed to pay $614 million to the U.S. government and admitted that it defrauded federal agencies by underwriting sub-standard mortgage loans.

JPMorgan, the largest U.S. bank by assets, said as part of the settlement that for more than a decade it approved thousands of insured loans that were not eligible for insurance by the Federal Housing Administration or the Department of Veterans Affairs, according to court papers.

As a consequence, "both the FHA and the VA incurred substantial losses when unqualified loans failed and caused the FHA and VA to cover the associated losses," the U.S. Justice Department said in a statement.

JPMorgan is one of several banks that has faced similar allegations. Citigroup Inc and Deutsche Bank AG have also reached settlements, while the Justice Department is seeking $2.1 billion in penalties from Bank of America Corp after a jury found the bank liable for fraud over mortgages sold by its Countrywide unit.

Last year, JPMorgan agreed to about $20 billion in settlements in its drive to clear up legal claims. The deals covered claims over other mortgage issues, as well as derivatives and power trading.

The latest settlement was filed in U.S. District Court for the Southern District of New York and was approved by Judge J. Paul Oetken, according to a statement from the U.S. Attorney's Office in Manhattan.

The bank said in a statement that the "settlement represents another significant step in the firm's efforts to put historical mortgage-related issues behind it."

It added that it has already recorded reserves for the settlement and does not expect the deal to have any significant additional financial impact.

The settlement with the Justice Department began with a whistleblower, Keith Edwards, who sued JPMorgan in January 2013 under an anti-fraud law known as the False Claims Act. The law allows individuals to sue government contractors and suppliers for defrauding taxpayers. Whisteblowers can keep a slice of the penalty if successful.

It has not been determined what Edwards' share will be, according to court papers. The existence of his suit was sealed until Tuesday.

The office of Preet Bharara, the U.S. attorney in Manhattan whose staff worked with Edwards on the suit, said the case was one of eight civil fraud suits that it had brought since May 2011 alleging fraudulent lending practices by residential mortgage lenders.

In February 2012, Citigroup agreed to pay $158.3 million and Flagstar Bancorp Inc agreed to pay $132.8 million. In May 2012, Deutsche Bank settled for $202.3 million.

In other recent legal claims, JPMorgan on Monday agreed to pay $1.45 million to settle four-year-old allegations brought by the U.S. Equal Employment Opportunity Commission that the bank had maintained a sexually hostile environment for women in a mortgage loan center on Ohio.

On Tuesday a federal bankruptcy judge approved the bank's $543 million deal to end two private lawsuits stemming from its relationship with convicted Ponzi scheme mastermind Bernard Madoff. Last month, the bank separately agreed to pay more than $2 billion to settle criminal charges related to the Madoff fraud.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
CharlesReed wrote:
Now we can get onto Wells Fargo Bank and the thousands of Washington Mutual Bank (WaMu) pooled FHA & VA loans they illegally foreclosed on pretending that they were the “owner” of these loans. The FHA & VA have had paid out at hundreds of million for just the WaMu loans!

Wells Fargo back on Jul 31, 2006 made a mortgage servicing deal with WaMu to service the 1.3 million government insured loans of WaMu, that went under the radar with the cover of the FDIC sell to JPMorgan that made it seem as if the sell encompass all WaMu loans.

However as its been revealed that JPMorgan did not purchase WaMu loans, because Fannie Mae, Freddie Mac and Ginnie Mae all had claims on these loans. You could not have foreclosed on loan your not own a debt, and the last party having possession of the debt in WaMu separated the Notes from the debts, which is a fatal mistake!

Feb 04, 2014 10:07pm EST  --  Report as abuse
BigTexasSteer wrote:
Nothing will change until the banks fail and their CEOs are in jail

Feb 05, 2014 12:27am EST  --  Report as abuse
BigTexasSteer wrote:
Nothing will change until the banks fail and their CEOs are in jail

Feb 05, 2014 12:27am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.