JP Morgan RMBS Settlement Finally Final

The Department of Justice has confirmed the $13rnbillion settlement with JP Morgan that has been widely reported in the press asrna done deal for over a month.  It willrnresolve federal and state civil claims arising out of the packaging, marketing, sale andrnissuance of residential mortgage-backed securities (RMBS) by JPMorgan, BearrnStearns and Washington Mutual prior to Jan. 1, 2009. </p

The record-breakingrnsettlement will allocate $9 billion to resolve various claims by federal andrnstate entities according to the following breakdown:  $2 billion is a civil penalty levied by thernDepartment of Justice, $1.4 billion and $515.4 million will settle claims byrnthe National Credit Union Administration and the Federal Deposit Insurance Corporation;rnand state level claims will be settled as follows:  California, $298.9 million; Delaware, $19.7rnmillion; Illinois, $100 million to Illinois; Massachusetts, $34.4 million; NewrnYork, $613.8 million.  Four billionrndollars will be paid to settle claims from the Federal Housing Finance Agencyrnand much of that money is expected to be used to assist distressed homeowners.  </p

As part ofrnthe settlement, JPMorgan acknowledged it made serious misrepresentations to thernpublic – including the investing public – about numerous RMBSrntransactions.  The resolution also requires JPMorgan to provide muchrnneeded relief to underwater homeowners and potential homebuyers, includingrnthose in distressed areas of the country.  The settlement does not absolvernJPMorgan or its employees from facing any possible criminal charges. Asrnreported earlier the latter was critical in negotiations as JP Morgan sought tornend the possibility of further action in a criminal case being pursued inrnfederal court in Sacramento. </p

“Without a doubt, the conductrnuncovered in this investigation helped sow the seeds of the mortgage meltdown,”rnsaid Attorney General Eric Holder.  “JPMorgan was not the only financialrninstitution during this period to knowingly bundle toxic loans and sell them tornunsuspecting investors, but that is no excuse for the firm’s behavior. rnThe size and scope of this resolution should send a clear signal that thernJustice Department’s financial fraud investigations are far from over.  Nornfirm, no matter how profitable, is above the law, and the passage of time is nornshield from accountability.  I want to personally thank the RMBS WorkingrnGroup for its tireless work not only in this case, but also in therninvestigations that remain ongoing.”</p

Shaun Donovan, Secretary of Housingrnand Urban Development released the following statement.  “I’m proud to have worked with AttorneyrnGeneral Holder in negotiating a settlement with JP Morgan that will helprnAmericans stay in their homes. President Obama’s Mortgage Backed SecuritiesrnTask Force was created to hold banks accountable for actions that led to thernhousing crisis and today was another important step in that process. Thisrnagreement ensures that accountability includes assistance to American consumersrnand communities hardest hit by the housing crisis by providing $4 billion inrnrelief that could benefit more than 100,000 borrowers.””

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