Underwater homeowners and potential homebuyers will get something out of the Justice Department’s $13 billion settlement with JPMorgan. More than 100,000 homeowners are expected to benefit from a $4 billion pot of money set aside for them.
The settlement resolves federal and civil lawsuits generated after the 2008 financial crisis when it was discovered that JP Morgan and companies it acquired, Bear Stearns and Washington Mutual, packaged risky home loans and sold them as safe mortgage-backed securities.
The $4 billion will be used in a variety of ways by JPMorgan including:
- Principal forgiveness.
- Loan modification.
- New loans.
- Efforts to reduce blight.
The Justice department plans to appoint an independent monitor to make sure the money goes to the right places. If it doesn’t by the end of 2017, it must pay the money to an affordable housing not-for-profit called NeighborWorks America.
A large portion of the $13 billion will go back to several states. It’s possible that will also benefit homeowners.
$298.9 million to California.
$19.7 million to Delaware.
$100 million to Illinois
$34.4 million to Massachusetts
$613.8 million to settle claims by the State of New York.
Attorney General Eric Holder said, “Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown. JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior.”