J.P. Morgan to Pay $55 Million to Settle With U.S. Over Alleged Discrimination Against Minority Homeowners -- 4th Update
January 18 2017 - 1:43PM
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 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
said 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, and down-payment size. However, mortgage
brokers had discretion to deviate from those guidelines and to set
the final price of the loans.
The complaint said 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 move comes as the Obama administration has been working to
settle several cases with companies in the waning days of his
presidency, including Volkswagen AG, Takata Corp. and Moody's
Corp.
Also on Wednesday, the U.S. Department of Labor sued J.P. Morgan
for discriminatory pay practices against certain female
employees.
The DOL's Office of Federal Contract Compliance Programs found
that since May 2012, J.P. Morgan paid at least 93 women who worked
in a technology unit in its investment bank less than men in the
same positions.
J.P. Morgan spokeswoman Tasha Pelio said the bank is committed
to "diversity in the workplace," a matter bank chief James Dimon
has been vocal on for years.
Ms. Pelio added that J.P. Morgan tried to work with the DOL on
the matter and resolve any concerns but was "disappointed" that it
filed a complaint. The bank "looks forward to presenting our
evidence to a neutral decision maker," she said.
The matter has been progressing for a few years, people familiar
with the matter said, and the bank provided several responses to
the DOL's requests disagreeing with the allegations, including an
attempt to refute it late last year.
A DOL spokesman didn't have any further comment.
But with two days to go until Mr. Trump's inauguration, some
agencies are moving to make long-running matters public.
The Southern District's Mr. Bharara has agreed to stay in his
current role under the Trump administration.
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.
That FHA, different from the Fair Housing Act, 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. last year 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 Federal Housing
Administration 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 13:28 ET (18:28 GMT)
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