J.P. Morgan to Pay $55 Million to Settle With U.S. Over Alleged Discrimination Against Minority Homeowners -- 3rd Update
January 18 2017 - 11:56AM
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 used by 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" who weren't bank employees and whose fees were capped. 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 spokesman for the Manhattan U.S. attorney's office confirmed
the existence of a settlement that is subject to judicial approval.
He declined to comment on the amount of the settlement.
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 complaint says that an analysis of loan data that takes into
account those objective factors shows there was still a disparity
between the rates charged for white and minority mortgage holders.
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 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, Takata Corp.
and Moody's 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 lending. 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 Federal
Housing Administration and the Department of Veterans Affairs.
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 financial crisis. 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 and often pay higher rates than elsewhere in the
mortgage world.
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 11:41 ET (16:41 GMT)
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