Tomahawk, WI 02/05/2014 (BasicsMedia) – If investors of JPMorgan Chase & Co. (NYSE:JPM) thought that its payment of $4 billion to settle cases lodged by F.H.F.A. would lead to closure of all cases, they had another thing coming. It has now emerged that the U.S.’s largest bank has agreed to pay another $614 million and also set up a ‘quality control’ department.
The $4 Billion Story:
The period up to 2007 saw a boom in the financial markets. The economy was doing very well and the realty sector was on fire. The housing sector was on a upward trend and every American wanted their own homes. They found that the financial sector was ready to lend them mortgage loans. In the rush to attract maximum customers, the financial institutions overlooked several shortcomings. After all, the value of the homes could cover any defaults. The financial institutions like JPMorgan Chase & Co. (NYSE:JPM) bundled these loans and sold them to refinance institutions like Fannie Mae and Freddie Mac. But the boom ended very dramatically in 2008 and the value of the homes also fell. Defaults forced companies like Fannie Mae and Freddie Mac to fold up and the federal government had to step in to prevent a collapse of the financial markets. The F.H.F.A. initiated recovery proceedings against the financial institutions alleging that they had misguided and withheld information about the riskiness of the mortgages. JPMorgan settled their case with the highest amount of $4 billion.
The Current Settlement:
This was not the only case being faced by JPMorgan Chase & Co. (NYSE:JPM). Another case was also initiated alleging that the bank approved unqualified home mortgage loans for insurance and refinancing. The government lost millions of dollars when these defaulted. The government alleged that the bank was aware that some of the loans would not be repaid and that some of the borrowers did not meet the standards. JP Morgan has settled the case for $614 million and has also initiated steps to improve the quality of loans.
JP Morgan has had to pay several penalties; this is one more step in the process to clean up its act.