JPM JP Morgan Chase and Co

BB&T Corp. has reached an $83 million settlement with the U.S. Justice Department over issues with loans backed by the Federal Housing Administration.

The bank said it settled the inquiry without any admission of liability to avoid the cost and uncertainty of potential litigation.

BB&T on Thursday said that because of its previous $85 million of accruals, the settlement won't affect its financial results. BB&T also is "pursuing a potential recovery" of about $70 million for "a related matter."

The Justice Department alleged that BB&T violated the False Claims Act by originating and underwriting loans that didn't meet applicable requirements. The agency said BB&T "admitted to the following facts" that it listed concerning loan-quality issues.

SunTrust Banks Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. are among the banks that have reached FHA-related settlements.

Because banks must certify that FHA-backed mortgages they originate have no errors, when mistakes are found, the Justice Department sometimes has pursued damages under the False Claims Act.

Some banks, believing the penalties are too harsh relative to the errors made, have pulled back from originating FHA-backed mortgages and argued that the broad "certification" they must make when originating a mortgage should be limited to significant errors.

Write to Josh Beckerman at josh.beckerman@wsj.com

(END) Dow Jones Newswires

September 29, 2016 18:45 ET (22:45 GMT)

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