J.P. Morgan Chase & Co. is about one-fifth of the way
finished with doling out the $4 billion in consumer aid that was
required as part of its mortgage-securities settlement with the
Justice Department last year, according to a new report the bank
submitted to an independent monitor.
The bank calculates it should receive about $869 million worth
of credit for actions like slashing mortgage debts for struggling
homeowners and lending to low-income home buyers, according to a
report released Wednesday by Joseph Smith, who was hired to ensure
the nation's largest bank by assets followed the consumer-relief
terms as part of its $13 billion Justice Department settlement.
The Justice Department is requiring J.P. Morgan, as well as Bank
of America Corp. and Citigroup Inc., to spend money assisting
struggling borrowers as a condition of their recent,
multibillion-dollar settlements where the banks settled accusations
that they had misled investors about the quality of the mortgage
securities they sold in the run-up to the financial crisis.
Mr. Smith, a former North Carolina banks commissioner who also
made sure that big banks lived up to their consumer-aid
requirements after the 2012 national mortgage settlement, said his
office still needs to validate J.P. Morgan's calculations before
the bank can get credit. J.P. Morgan is paying for Mr. Smith's
review, but both the bank and Justice Department had to agree to
the hiring.
"We are pleased to have provided more than 46,000 families $7.6
billion in mortgage relief," either through mortgage modifications
or loans to struggling borrowers, a bank spokesman said in a
statement, adding that the relief adds up to $869 million in credit
to the bank, under its calculations. "We are working very hard to
help as many homeowners as quickly as possible, and look forward to
formal validation of our effort" by Mr. Smith later this year.
According to the report that J.P. Morgan submitted last month to
Mr. Smith's office, the bank has so far modified mortgages for
nearly 7,000 homeowners. About 2,600 of those borrowers saw their
average monthly payments slashed by $540, or nearly 40%, J.P.
Morgan calculates.
J.P. Morgan also estimates that it has made mortgage loans to
nearly 39,500 struggling borrowers. The bank can get credit toward
its $4 billion obligation by lending to borrowers who might
otherwise be overlooked, such as low-income first-time home buyers,
people who have lost previous homes to foreclosure and short sales,
and people in certain FEMA-designated disaster zones.
The bank gets various amounts of credit for different actions.
For example, under certain circumstances it can get $1 credit for
forgiving $1 in mortgage principal, but it can get more credit for
lending in areas that the government deems particularly distressed.
The bank receives less credit for modifying loans owned by other
investors.
Under the settlement, J.P. Morgan is required to make quarterly
reports to Mr. Smith on the progress of its loan-relief activities.
His staff is charged with reviewing samples of the bank's cases in
detail to validate whether J.P. Morgan has satisfied its
obligations.
In late July, Mr. Smith's office released its first report on an
initial sample of 100 mortgages that J.P. Morgan modified and
submitted for $6.3 million in credit. Mr. Smith's office said at
the time that the bank had followed the proper procedures for
modifying those loans and calculating the credit it deserved.
Citigroup's $7 billion mortgage-securities settlement in July
included $2.5 billion in consumer aid, and Bank of America's $16.65
billion settlement in August included $7 billion for consumer aid.
They will also be overseen by independent monitors.
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