JP Morgan admits it wrongfully filed FHA and VA mortgages
Bad loan writing goes back to 2002
JPMorgan Chase [JPM] will pay $614 million for violating the False Claims Act, according to a release by the The Department of Justice.
The DOJ claims JPM knowingly originated and underwrote non-compliant mortgage loans submitted for insurance coverage and guarantees by the Department of Housing and Urban Development’s Federal Housing Administration and the Department of Veterans Affairs. The FHA was particularly susceptible to the deeds due to a weak, automated underwriting system.
“The resolution announced today 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 in the statement. "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."
JP Morgan admits that, for more than a decade, it approved thousands of FHA loans and hundreds of VA loans that were not eligible for the Federal insurance.
JPM also 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 the 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."
Bharara said the lender put profits ahead of responsibility.
The attorney said that with this settlement, JPMorgan Chase accepts responsibility for its misconduct and is committed to reform.
The misrepresentations began in 2002, the DOJ claims. Both the FHA and VA incurred heavy losses when these loans defaulted.
HUD’s Acting General Counsel Damon Smith said Chase will now institute new and tighter controls to prevent abuses.