The Justice Department sent shivers through the mortgage banking industry over the weekend with word that it had have reached a tentative $13 billion settlement with JP Morgan Chase over the bank's questionable mortgage practices leading up to the financial crisis.
The record penalty would cap weeks of heated negotiating and underscore the extent of the bank's legal woes.
The deal, which the Justice Department took the lead in negotiating and which came together after a weekend call involving Attorney General Eric H. Holder Jr. and JPMorgan's chief executive, Jamie Dimon, would resolve an array of state and federal investigations into the bank's sale of troubled mortgage investments, according to the New York Times. That type of investment - securities typically backed by subprime home loans - was at the heart of the financial crisis.
While the deal would put those civil cases to rest, it would not save JPMorgan from a parallel criminal inquiry from federal prosecutors in California, the New York Times reported. Under the terms of the preliminary deal, the bank would also have to assist prosecutors with an investigation into former employees who helped create the mortgage investments.