by Ben Vernia | February 5th, 2014
On February 5, the Department of Justice announced that JP Morgan Chase has paid $614 million to resolve allegations that the bank submitted false claims for mortgages to the VA and HUD’s Federal Housing Agency. According to DOJ’s press release:
The Department of Justice today announced that JPMorgan Chase (JPMC) will pay $614 million for violating the False Claims Act by knowingly originating and underwriting non-compliant mortgage loans submitted for insurance coverage and guarantees by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). JPMC is a bank and financial services company headquartered in New York.
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As part of the settlement, which was handled by the U.S. Attorney’s Office for the Southern District of New York, JPMC admitted that, for more than a decade, it approved thousands of FHA loans and hundreds of VA loans that were not eligible for FHA or VA insurance because they did not meet applicable agency underwriting requirements. JPMC further admitted that it 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 FHA and VA insurance.
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Beginning as early as 2002, JPMC falsely certified that loans it originated and underwrote were qualified for FHA and VA insurance and guarantees. As a consequence of JPMC’s misrepresentations, both the FHA and the VA incurred substantial losses when unqualified loans failed and caused the FHA and VA to cover the associated losses.
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The FHA’s Single Family Mortgage Insurance Program enables low- and moderate- income borrowers to purchase homes by insuring qualified loans made by participating lenders, such as JPMC, against losses if the loans later default. A participating lender may only submit to the FHA creditworthy loans meeting certain requirements and must maintain a quality control program that can prevent and correct any deficiencies in the lender’s underwriting practices. The VA’s Loan Guaranty Program provides similar assistance to veterans, service members and qualifying surviving spouses.
The Department announced that the case had been brought originally by a whistleblower, but the government did not announce the share (if any) the whistleblower will receive.
