Two major US banks handed over a total of $1.86 billion (£1.14 billion) to American authorities last night in the continuing saga over mortgages which cost taxpayers billions.
JPMorgan Chase agreed to pay the government $614 million and admitted it defrauded federal agencies by underwriting sub-standard mortgage loans.
The bank — the largest in the US by assets — said that for more than a decade it approved 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. This meant both agencies “incurred substantial losses when unqualified loans failed”, the US Department of Justice said.
JPMorgan’s settlement came hours after Morgan Stanley agreed to pay $1.25 billion to the regulator which oversaw the $187 billion bailouts of mortgage-guarantee firms Fannie Mae and Freddie Mac.
US attorney Preet Bharara said JPMorgan Chase had for years participated in state-subsidised programmes to make homes more affordable. “Yet, for more than a decade, it abused that privilege,” he said.
“JPMorgan Chase put profits ahead of responsibility by recklessly churning out thousands of defective mortgage loans and leaving the government to cover the losses when loans defaulted,” he added.
