JPMorgan Chase & Co has agreed to pay the U.S. $614 million to resolve more False Claims Act allegations that it defrauded federal agencies by knowingly originating and underwriting substandard mortgage loans that failed to comply with federal insurance requirements, the Justice Department said on Tuesday.
The settlement began with a whistleblower, Keith Edwards, who sued JPMorgan in January 2013 under the False Claims Act, an anti-fraud law that allows individuals to sue government contractors, suppliers, and other entities for defrauding taxpayers. In exchange, whistleblowers receive a percentage of the recovery in successfully argued cases.
According to court documents, JPMorgan, the largest U.S. bank by assets, admitted that it approved thousands of Federal Housing Authority (FHA) loans and hundreds of Veterans Administration (VA) loans that were not eligible for FHA or VA insurance because they did not meet applicable agency underwriting requirements.
As a consequence, “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 Justice Department said.
“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. “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.”
JPMorgan is one of several banks under fire for defrauding U.S. taxpayers and contributing to the financial crisis. Citigroup Inc. and Deutsche Bank have also reached settlement agreements with the U.S. Bank of America Corp. remains on the hook for $2.1 billion in penalties after a jury found the bank’s Countrywide unit liable for mortgage fraud.
Last year, JPMorgan agreed to pay a record $20 billion in settlements to the U.S. in an effort to resolve claims stemming from bad mortgage practices, derivatives, and power trading.