ALEXANDRIA, Va. – The U.S. Department of Justice (DOJ) on Tuesday announced a $13 billion settlement with JPMorgan Chase over allegations that the bank misled investors over faulty mortgage bonds sold in the lead-up to the 2008 financial crisis.
The NCUA will receive $1.4 billion under the terms of the settlement to regain costs associated with losses to the corporate credit unions brought by residential mortgage-backed securities of alleged questionable quality.
The DOJ is also reportedly considering criminal charges against JPMorgan.
The settlement announcement comes just two days before the NCUA discusses the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment on natural person credit unions for 2014 at its open board meeting.
The NCUA lawsuits alleged JPMorgan oversold the quality of certain mortgage-backed securities (MBS) it issued, underwrote, and sold to U.S. Central FCU, Western Corporate FCU, and other corporates from 2006 to 2007. The corporates collapsed in 2009, and NCUA, as their liquidating agent, sued a number of Wall Street banks that issued or underwrote the securities that contributed to the corporates' collapse.
The agency alleged systemic disregard of underwriting guidelines stated in the offering documents and says the alleged misrepresentations caused U.S. Central and WesCorp to believe the risk of loss on the investments was minimal, when in fact, the risk was substantial.
In addition to JP Morgan, the NCUA has also filed lawsuits against RBS Securities, Wachovia Capital Markets and Wells Fargo, Barclay's Capital Inc., Goldman Sachs, and UBS Securities. The agency has also settled claims of more than $170 million with Citigroup, Deutsche Bank Securities, and HSBC.