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JPMorgan Chase has reached yet another settlement with federal prosecutors. Now, it will pay $614 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting non-compliant mortgage loans submitted for insurance coverage and guarantees by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).
The settlement “is a product of the Justice Department’s continuing efforts to hold accountable those whose conduct contributed to the financial crisis,” said Associate Attorney General Tony West. “This settlement recovers wrongfully claimed funds for vital government programs that give millions of Americans the opportunity to own a home and sends a clear message that we will take appropriately aggressive action against financial institutions that knowingly engage in improper mortgage lending practices.”
“The Department of Justice will continue to hold accountable financial institutions whose irresponsible mortgage lending undermines the housing market and costs the taxpayers many millions of dollars,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.
As part of the settlement, which was handled by the U.S. Attorney’s Office for the Southern District of New York, JPMorgan admitted that, for more than a decade, it approved thousands of FHA loans and hundreds of VA loans that were not eligible for FHA or VA insurance because they did not meet applicable agency underwriting requirements. JPMorgan further admitted that it failed to inform the FHA and the VA when its own internal reviews discovered more than 500 defective loans that never should have been submitted for FHA and VA insurance.
“For years, JPMorgan Chase has enjoyed the privilege of participating in federally subsidized programs aimed at helping millions of Americans realize the dream of homeownership,” said U.S. Attorney for the Southern District of New York Preet Bharara. “Yet, for more than a decade, it abused that privilege. JPMorgan Chase put profits ahead of responsibility by recklessly churning out thousands of defective mortgage loans, failing to inform the government of known problems with those loans and leaving the government to cover the losses when the loans defaulted.” With this new settlement, Bharara added, “JPMorgan Chase has accepted responsibility for its misconduct and has committed to reform its business practices. This settlement adds to the list of successful mortgage fraud cases this office has pursued.”
According to prosecutors, beginning as early as 2002, JPMC falsely certified that loans it originated and underwrote were qualified for FHA and VA insurance and guarantees. As a consequence of JPMC’s misrepresentations, 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 government said. The settlement resolves allegations in a complaint filed by a private whistleblower.
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