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Business

JPMorgan to pay NY $1Bn over mortgage crisis

By
Mark DeCambre
Published Nov. 19, 2013, 2:44 p.m. ET

Thousands of underwater homeowners across New York may see some financial relief from the record-setting $13 billion mortgage- bond settlement Tuesday between JPMorgan Chase and federal and state regulators.

More than $1 billion in relief will be heading to the Empire State, according to state Attorney General Eric Schneiderman.

That includes $613 million in cash and $400 million in consumer relief for homeowners now “underwater,” meaning they owe more on the mortgage than the house is worth.

Some areas of the state were among the harder hit by the 2008 housing collapse. New York has the highest foreclosure inventory in the nation, at 4.7 percent of mortgaged homes, according to CoreLogic.

New York also has virtually double the national average of severely delinquent mortgages, at almost 10 percent, according to the Federal Reserve Bank of New York.

“This historic deal, which will bring long-overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do,” Schneiderman said in a statement, calling the JPMorgan deal a “major victory.”

For JPMorgan Chase CEO Jamie Dimon, it was a lesson learned. The usually feisty bank executive sounded subdued Tuesday, saying he harbored regrets about ever completing the crisis-era deal to purchase Bear Stearns and Washington Mutual.

JPM estimates that 80 percent of its mortgage troubles stem from the acquisition of Bear and WaMu.

“We simply wouldn’t undertake it,” Dimon said of the deals. “We never expected this kind of stuff to happen.”

JPMorgan is expected to complete its consumer relief programs by 2017, and a monitor will be appointed to assure that the bank keeps its end of the agreement.

The long-awaited settlement is expected to put to rest the lion’s share of civil legal headaches that have dogged JPMorgan and Dimon.

JPMorgan’s deal comprises $7 billion in compensatory payments, which includes $4 billion paid to the Federal Housing Finance Agency earlier this month.

It also includes a $2 billion fine and the $4 billion in broad relief to consumers throughout the country.

JPMorgan admitted to a “set of facts” but did not broadly admit wrongdoing as a part of the agreement related to its underwriting of dicey mortgage securities, CFO Marianne Lake said during a Tuesday afternoon call to discuss the deal.

With most the deal terms already emerging in news reports over the past several weeks, anticipation over the official announcement of a settlement offered the only real excitement.

Schneiderman’s decision to host a press conference on the settlement just minutes before Eric Holder’s Justice Department did the same raised eyebrows in and around Wall Street.

Holder, in a statement, said the settlement with JPM, the first of many expected with banks, would be used as a model for other deals.

“The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over,” Holder said.