JPMorgan, Feds Reach Record $13B Deal on RMBS Claims

""JPMorgan Chase"":http://www.jpmorganchase.com has struck a deal with the U.S. Department of Justice to resolve civil claims from both federal and state officials over residential mortgage-backed securities (RMBS) issued prior to January 1, 2009, by the bank and two financial institutions it acquired in 2008├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô-Bear Stearns and Washington Mutual.

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The $13 billion settlement is the largest in American history between the U.S. government and a single entity.

Under the agreement reached, JPMorgan will pay $9 billion in restitution and provide an additional $4 billion in relief for homeowners at risk of foreclosure and communities impacted by the housing crisis. Federal officials say the relief funding could benefit more than 100,000 borrowers.

According to JPMorgan, the cash portion of the settlement payment consists of a $2 billion civil monetary penalty and $7 billion in compensatory payments, including a previously announced $4 billion payment to resolve litigation ""claims from the Federal Housing Finance Agency"":https://themreport.com/articles/jpmorgan-fhfa-settle-on-51b-deal-over-soured-loans-2013-10-28.

Borrower relief will be in the form of principal reduction, forbearance, and other direct benefits from various relief programs, the bank explained. JPMorgan Chase has committed to complete delivery of the promised relief to borrowers before the end of 2017.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage-backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis.

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""New York Attorney General Eric T. Schneiderman"":http://www.ag.ny.gov/ co-chairs the RMBS Working Group. Tuesday's settlement comes 13 months after Schneiderman sued JPMorgan for fraudulent RMBS packaged and sold by Bear Stearns before it was acquired by JPMorgan at the behest of government officials at the Federal Reserve, FDIC, and U.S. Treasury.

In announcing the unprecedented settlement, Schneiderman said, ""Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy. This historic deal ... is exactly what our working group was created to do.""

He continued, ""We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we've won a major victory today in the fight to hold those who caused the financial crisis accountable.""

Separately, the ""FDIC"":http://www.fdic.gov announced Tuesday that it also reached a settlement with JPMorgan Chase and its affiliates in relation to the failure of six banks. The FDIC, acting as receiver for the failed institutions, says misrepresentations where made in the offering documents for 40 RMBS purchased by the now-defunct banks.

JPMorgan agreed to pay $515.4 million, which will be distributed among the receiverships for the failed Citizens National Bank (failed May 22, 2009), Strategic Capital Bank (May 22, 2009), Colonial Bank (August 14, 2009), Guaranty Bank (August 21, 2009), Irwin Union Bank and Trust Company (September 18, 2009), and United Western Bank (January 21, 2011).

From May 2012 to September 2012, the FDIC as receiver for five of the failed banks filed 10 lawsuits against JPMorgan, its affiliates, and other defendants for violations of federal and state securities laws in connection with the sale of RMBS.

As part of the global settlement reached, JPMorgan acknowledged it made serious, material misrepresentations to the public--including the investing public--about numerous RMBS transactions, according to a statement on the New York attorney general's website.

JPMorgan Chase says it is fully reserved for this settlement.