JPMorgan faces criminal and civil probes over mortgages

Wed Aug 7, 2013 8:40pm EDT
 
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By David Henry

(Reuters) - JPMorgan Chase & Co, the biggest U.S. bank by assets, said on Wednesday that it faces a criminal probe by the U.S. Department of Justice over sales of mortgage-backed securities and that civil investigators have already concluded it violated securities laws.

In a quarterly filing with the Securities and Exchange Commission, JPMorgan said it is responding to "parallel investigations" being conducted by the civil and criminal divisions of the United States Attorney's Office for the Eastern District of California over mortgage-backed securities.

In May, JPMorgan received a notice that the department's civil division had preliminarily concluded that the firm violated federal securities laws in offerings of subprime and Alt-A residential mortgage securities during 2005 to 2007, the filing said.

The company also said that it has received requests concerning mortgage securities from the U.S. attorney for Connecticut, the SEC's enforcement division and the inspector general for the government's primary bank bailout program.

A JPMorgan spokesman declined additional comment.

The disclosures came one day after government lawyers filed an $850 million civil lawsuit against Bank of America Corp over the sale of bonds backed by jumbo mortgages. The lawsuit followed a disclosure by Bank of America on August 1 that it expected to be sued by the Department of Justice and SEC over mortgage bonds.

News of the investigations comes after President Barack Obama vowed to hold companies responsible for breaking the law in financing the housing bubble that caused the 2007-2008 financial crisis and the Great Recession.

U.S. Attorney General Eric Holder said in a statement on Tuesday that Obama's Financial Fraud Enforcement Task Force, which brought the latest lawsuit against Bank of America, "will continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market," and is pursuing "a range of additional investigations."   Continued...

 
The entrance to JPMorgan Chase's international headquarters on Park Avenue is seen in New York October 2, 2012. REUTERS/Shannon Stapleton