JP Morgan Chase (JMPC) is to pay $614 million to settle a case over false claims the bank made involving mortgage loans. The Department of Justice announced the bank violated the False Claims Act by deliberately originating and underwriting non-compliant mortgage loans. The loans were submitted for insurance cover and guarantees by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA).

According to a press statement released by the Department of Justice, the bank admitted it approved thousands of Federal Housing Administration loans and VA loans which did not meet the necessary requirements.

“For years, J.P. Morgan Chase has enjoyed the privilege of participating in federally subsidized programs aimed at helping million of Americans realize their dream of home ownership,” said the Justice Department.

The statement continues that the bank began falsely certifying loans back in 2002. Having to cover associated losses, the agencies suffered “substantial losses” as a result of the bank’s fraud. Furthermore, JPMC admitted that it failed to inform the FHA and VA when its own internal reviews revealed more than 500 defective loans which should have never been put forward for VA or FHA insurance.









Financial Descrimination

One program JPMC abused was the FHA’s Single Family Mortgage Insurance Program. The program began 60 years ago as part of an effort to generate new construction activity. It quickly evolved as a platform for expanding access to mortgages for first-time buyers who have traditionally found it difficult to get on the property ownership ladder.

The Single Family Mortgage Insurance Program allows low and moderate-income borrowers to buy their own home by insuring qualified loans made by participating lenders, such as JPMC, against losses if the loan was later to default.

As the press release states, the lender may only submit FHA creditworthy loans that meet the various requirements. They must also maintain a quality control program which can prevent and correct any deficiencies in the lender’s underwriting practices.

The VA’s Loan Guarantee Program offers similar assistance to service members, veterans and qualifying surviving spouses.

In the first major case about whistleblowing of the year, the lawsuit was initiated by allegations made by a private whistleblower.

The settlement is part of Financial Fraud Enforcement Task Force (FFETF) efforts. President Obama established the FFETF in November 2009. The aim of the initiation was to make those who contributed to the last financial crisis accountable and to help prevent another financial crisis from occurring.

According to the Financial Crimes Enforcement Network (FinCEN), the task force is: