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
JPMorgan is one of several banks that has faced similar allegations.
Citigroup Inc <C.N> and Deutsche Bank AG <DBKGn.DE> have also
reached settlements, while the Justice Department is seeking $2.1
billion in penalties from Bank of America Corp <BAC.N> after a jury
found the bank liable for fraud over mortgages sold by its
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
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
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. Whistleblowers can keep a slice of the penalty
It has not been determined what Edwards' share will be, according to
court papers. The existence of his suit was sealed until Tuesday.
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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 <FBC.N> 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 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.
(Additional reporting by Nate Raymond;
editing by Bernard Orr and Edwina Gibbs)
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