J.P. Morgan to Pay $55 Million to Settle With U.S. Over Alleged Discrimination Against Minority Homeowners -- 2nd Update
January 18 2017 - 11:01AM
Dow Jones News
By Emily Glazer and Austen Hufford
J.P. Morgan Chase & Co. will settle with the U.S. Department
of Justice for $55 million over allegations that independent
brokers working for the bank discriminated against minority
mortgage seekers, a person familiar with the matter said.
The settlement is related to a complaint U.S. attorney Preet
Bharara filed Wednesday alleging that J.P. Morgan Chase Bank
charged African-American and Hispanic borrowers higher rates than
white borrowers from 2006 to 2009, in violation of the Fair Housing
Act.
A J.P. Morgan spokeswoman said the bank agreed to settle "these
legacy allegations that relate to pricing set by independent
brokers." She added that the bank denies any wrongdoing and is
committed to providing equal access to credit.
The complaint alleged that from 2006 until late 2009 the bank
used a network of contracted mortgage brokers to bring in loan
applications and that these "wholesale" loans had discriminatory
rates.
The bank "could have, but failed, to better monitor its
wholesale brokers to discourage discrimination," the complaint
reads.
A spokeswoman for the U.S. attorney's office of the Southern
District of New York declined to comment.
Using data analysis of loan records, the complaint alleges that
at least 53,000 black and Hispanic borrowers sustained tens of
millions of dollars total in higher payments.
At the time of the alleged actions, the bank had guidelines that
dictated the mortgage rates to be paid based on objective measures
such as credit score, down-payment size and other factors. However,
mortgage brokers had discretion to deviate from those guidelines
and to set the final price of the loans.
The bank allegedly charged black customers an average of $1,126
more on an average loan size of $191,100 and Hispanic customers
$968 more on a loan size of $236,800, compared with white
borrowers.
The move comes as the Obama administration has been working to
settle several cases with companies in the waning days of his
presidency, including settlements with Volkswagen AG and Takata
Corp.
Mr. Bharara has agreed to stay in his current role under the
Trump administration. Mr. Trump's inauguration is Friday.
This isn't the first time Mr. Bharara has gone head-to-head with
J.P. Morgan on Federal Housing Administration matters. In February
2014, the bank paid a $614 million settlement for originating and
underwriting mortgages that were submitted for insurance coverage
and guaranteed by the FHA and the Department of Veterans
Affairs.
J.P. Morgan has since pulled back sharply from FHA lending,
which has provided a source of financing to first-time buyers and
other borrowers with little wealth, especially minorities. It
allows borrowers to make lower down payments than elsewhere in the
mortgage world.
The FHA doesn't make loans but instead insures lenders against
losses on mortgages that meet its standards. Most banks haven't
been willing to offer many loans without some kind of government
backing since the housing boom ended.
"We've lost a tremendous sum of money on FHA, and we're trying
to figure out what to do going forward," Chief Executive James
Dimon told analysts during a July 2014 earnings conference
call.
Wells Fargo & Co. in August settled a similar-long-running
civil suit, admitting to illegally cashing in on government-backed
mortgages as part of a $1.2 billion settlement. As part of the
settlement, the bank admitted to having wrongly certified loans as
being eligible for mortgage insurance from the FHA with the actions
dating back to 2001, according to the settlement.
Write to Emily Glazer at emily.glazer@wsj.com and Austen Hufford
at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 18, 2017 10:46 ET (15:46 GMT)
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