JP Morgan, which is currently the largest U.S. banking entity in terms of assets, agreed earlier this week to settle claims under the False Claims Act involving fraudulent assertions that certain home loans were appropriate for government-backed mortgage insurance. The bank, which is no stranger to settling matters with the federal government, agreed to pay $614 million to American taxpayers despite admitting no liability in the matter. The bank received approval of the settlement earlier this week from Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York and stated that the settlement represents “another significant step in the firm’s efforts to put historical mortgage-related issues behind it.”
Allegations Against JP Morgan
The crux of the allegations against JP Morgan involve the bank’s fraudulent approval and certification of VA and FHA loans that did not actually meet the government’s standards. A VA loan is one available to veterans, service members, and their eligible surviving spouses. It is guaranteed by the United States Department of Veteran’s Affairs, provided the borrowers meet certain eligibility criteria. An FHA-insured loan is one carrying an insurance policy backed by the Federal Housing Administration and protects lenders against default. Again, FHA loans are based on creditworthiness and eligibility standards.
According to the DOJ’s assertions, JP Morgan engaged in sub-standard lending practices for more than a decade, approving ineligible borrowers and cutting corners in its underwriting practices. As a result, home loans were presented to the VA and FHA as meeting eligibility criteria when, in fact, they did not. Naturally, borrowers began to default and the federal government faced unprecedented mortgage loan claims.
This settlement is one of many settlements involving not only JP Morgan, but Citigroup and Deutsche Bank, as well. Following a recent jury verdict in favor of the DOJ, it expects to settle with Bank of America in the near future, as well.
DOJ Proud to Recover Taxpayers’ Money
As a result of the 2008 housing bubble, the DOJ has been relentless in recovering the money used by deceitful banks that rightfully belongs to the American taxpayer. Associate Attorney General Tony West stated:
“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….”
Under the False Claims Act, the plaintiff may recover up to 30 percent of any government funds recovered as a result of the lawsuit. This case was commenced by private whistleblower Keith Edwards and court papers do not reveal his ultimate reward.
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