JP Morgan to pay US$614m in mortgage fraud case

JP Morgan Chase settled the latest in a string of legal claims on Tuesday when it agreed to pay US$614 million to the US government and admitted that it had defrauded federal agencies by underwriting substandard mortgage loans.

JP Morgan, the largest US bank by assets, said as part of the settlement that it had approved for more than a decade thousands of insured loans that were not eligible for insurance by the Federal Housing Administration or the Department of Veterans Affairs, according to court papers.

As a consequence, "both the [housing administration] and the [Department of Veteran Affairs] incurred substantial losses when unqualified loans failed and caused [the two agencies] to cover the associated losses," the Department of Justice said.

JP Morgan is one of several banks that has faced similar allegations. Citigroup and Deutsche Bank have also reached settlements, while the justice department is seeking US$2.1 billion in penalties from Bank of America after a jury found the bank liable for fraud over mortgages sold by its Countrywide unit.

Last year, JP Morgan agreed to about US$20 billion in settlements in its drive to clear up legal claims. The deals covered claims over other mortgage issues, as well as derivatives and power trading.

The bank said the "settlement represents another significant step in [its] efforts to put historical mortgage-related issues behind it".