In a desperate attempt to put to rest all probes and legal woes related to its mortgage practices preceding the financial crisis, JPMorgan Chase & Co. (JPM) is in negotiation with various agencies for a multi-billion dollar settlement. Though the exact amount that the company will be required to pay is not known, going by market rumors, it could range from $3 billion to $7 billion.
The global settlement deal will not only cover the investigations and the civil and criminal charges related to mortgages that JPMorgan is facing at present. All the other probes and cases related to the businesses that it acquired during the financial crisis will likely be included in the settlement as well.
The regulatory agencies that are involved in the settlement talks include the Department of Justice (DOJ) and the Department of Housing and Urban Development (HUD) and the New York attorney general’s office.
The major cases and probes being conducted by these agencies include cases filed by the New York AG and the Federal Housing Finance Agency (FHFA). These cases are primarily related to the mortgage-backed securities sold by JPMorgan to Fannie Mae (FNMA) and Freddie Mac (FMCC).
Apart from negotiating the penalty amount, the talks center on which pending investigations and cases will be the part of the settlement. Moreover, the terms of the settlement could require JPMorgan to provide financial compensation to distressed homeowners as well.
However, the terms of the settlement are yet not finalized and even the talks could be called off by any of the parties involved.
If the settlement comes through, it will likely be a major victory for the DOJ as this will be the single largest company settlement. Earlier in 2011, GlaxoSmithKline plc (GSK) had agreed to pay $3 billion to settle a wide range of charges, including the misuse of the Medicaid health-care program for the poor.
For JPMorgan, the settlement will be a major relief. Moreover, it will lower the company’s litigation ambiguity to a certain extent.
Presently, JPMorgan faces investigations from at least 7 federal agencies, various state regulators and a couple of foreign governments. In addition to mortgage-related investigations and cases, the company’s debt collection practices and recruitment of the offspring of Chinese bureaucrats are the other areas being probed.
Currently, JPMorgan carries a Zacks Rank #3 (Hold).
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