J.P. Morgan, U.S. Reach Historic Settlement
J.P. Morgan Chase JPM +1.59% & Co. and the Justice Department Monday agreed to a landmark $13 billion settlement that resolves a number of legal headaches for the largest U.S. bank, clearing the way for a public announcement as soon as Tuesday, according to people familiar with the talks.
They added that the final piece holding up the deal—terms of $4 billion worth of aid to distressed homeowners—was completed Monday.
The historic settlement ends several investigations and lawsuits targeting soured mortgage bonds issued before the financial crisis and amounts to the biggest combination of fines and damages extracted by the U.S. government in a civil settlement with any single company.
The consumer-relief component was the most complex part of the pact, and the Justice Department asked the Department of Housing and Urban Development for assistance in the final negotiations, according to the people familiar with the talks.
They added that over the weekend, Attorney General Eric Holder and the Justice Department’s lead negotiator, Associate Attorney General Tony West, held lengthy discussions with HUD Secretary Shaun Donovan as they put the finishing touches on the terms.
J.P. Morgan agreed to pay at least $1.5 billion, and as much as $1.7 billion, to write down the principal amounts of J.P. Morgan-held loans in which the borrower owes more than the property is worth.
In addition, at least $300 million and as much as $500 million would go toward what the mortgage industry calls forbearance—restructuring some mortgages to reduce the monthly payments, the people said.
The other $2 billion in consumer relief will be directed toward a number of different measures, including new mortgage originations for low- and moderate-income borrowers, or absorbing the remaining principal owed on properties that have been vacated but not yet foreclosed upon, the people said.