Washington/New York: JPMorgan Chase & Co is expected to sign a USD 13 billion agreement with the US government on Tuesday to settle claims it overstated the quality of mortgages sold to investors during the housing boom, two people familiar with the matter said.
The civil settlement would mark the end of weeks of tense negotiations between JPMorgan Chase, the largest US bank, and government agencies under pressure to hold banks accountable for wrongdoing that led to the housing crisis.
Even after the settlement, the bank faces at least nine other government investigations, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate.
JPMorgan Chase and government agencies led by the Justice Department had reached a tentative agreement in mid-October and have been hammering out details since then.
Earlier this week the bank and officials at the US Justice Department and US Department of Housing and Urban Development agreed to terms of a USD 4 billion relief package that is part of the broader deal, paving the way for the full announcement.
Of the USD 4 billion, about USD 1.5 billion is for the bank to write down the value of loans on its books, effectively forgiving some borrower debt. As much as USD 500 million more would go to change the terms of loans to lower monthly payments.
The remaining USD 2 billion would go for assorted measures, including new loans for low- and moderate-income borrowers in areas that have been hard-hit by the housing crisis and for demolishing abandoned homes, a source said.
Last month the Federal Housing Finance Agency announced a related USD 5.1 billion deal to resolve claims about the quality of mortgage bonds it sold, USD 4 billion of which is part of the expected announcement.
JPMorgan`s negotiations with the Justice Department began in earnest last spring, after Justice Department lawyers in California reached a preliminary conclusion that the bank had violated US civil laws. The Justice Department looked into mortgage bonds the bank had sold from 2005 through 2007, the company disclosed in August.
First Published: Tuesday, November 19, 2013, 23:27