JP Morgan allegedly paid $8.2 Billion in Government fines by cancelling loans it no longer held
It’s serious allegations that could go all the way to the top. JP Morgan may have used fake mortgages to pay off a fine it was hit with after the 2008 financial crash. According to an investigation by The Nation, the scheme may have involved JP Morgan CEO Jamie Dimon, if no direct involvement, he at least looked the other way while his company scammed investors, homeowners, and ultimately taxpayers.
First, a little context. Back in 2008, JP Morgan was hit with 8.2 billion in fines after it was discovered just how they contributed to the mortgage collapse that cost millions of Americans their jobs, homes, and livelihoods. The company used “robo-signing” to automatically sign hundreds of foreclosure documents a day—without due diligence. After this scheme was discovered in 2012, then Attorney General, Eric Holder, negotiated a settlement with JP Morgan. The National Mortgage Settlement fined 5 banks, including JP Morgan for $25 billion. Most of the company’s fine was to be paid in the form of financial relief for homeowners who were in danger of possible foreclosure.
The New Scheme
According to The Nation, here’s where things get even more sinister. Their sources allege that JP Morgan paid it’s due by canceling loans it no longer held; basically, using other people’s money to meet their settlement burden.
Documents detailing the alleged plot have come to light during a lawsuit that’s being heard in New York City. The lawsuit makes use of internal JPMorgan documents, public records, and testimony from homeowners and investors who say they were taken for a ride by the megabank.
It’s a startling turn of events summed up, in the article, by former Congressman Brad Miller, “If the allegations are true, JPMorgan screwed everybody.”
The most telling evidence seems to come from the internal documents of JP Morgan, which imply that the company CEO and chairman, Jamie Dimon knew about, and possibly helped execute, the fake mortgage forgiveness of nearly worthless loans.
Here’s what the lawsuit alleges:
- The bank sold thousands of worthless loans
- When it needed to forgive loans due to their settlement, the bank claimed to still own the loans it sold off
- Homeowners were sent letters of “forgiveness” by JP Morgan, but still owned the new company that bought the loans
According to the lawsuit, some federal employees may have also known about the fraud. There are emails that show the Office of Settlement Oversight gave JP Morgan the “go-ahead” to forgive the worthless loans.
The lawsuit, now working its way through the court system, highlights what could have been a typical scenario for impacted homeowners and investors. A family, in massive debt and close to foreclosure, discovers a smaller investor has bought their mortgage. They negotiate for better terms and meet the new payments. The homeowners are then told by JP Morgan that the loan is forgiven but the new investor is the one actually holding the purse strings. Chaos ensues.
This particular scam was discovered because the homeowner at the center of the lawsuit, Lauren Warwick, happened to be neighbors with the speaker of the Maryland House of Delegates. After a review of the documents, Michael Busch’s office had suspicions and relayed them to the Maryland Department of Labor, Licensing, and Regulation. Soon everyone, including the owner of the Warwick’s worthless mortgage, Larry Schneider, demanded answers. That demand led to what appears to be the forgiveness of tens of thousands of worthless loans by JP Morgan in an attempt to pay back their settlement burden.
It’s not just individual homeowners and investors who may have been “had,” taxpayers could be paying a price for the possible deceit as well. The loans that JP Morgan received credit for forgiving were worthless, and many abandoned by homeowners. This led to a surge of blighted houses for which no one took responsibility. The Nation says the alleged scheme led to mass confusion about who was responsible for the now abandoned homes. Municipalities lost thousands in tax revenue and gained abandoned house after abandoned house.
Larry Schneider has two lawsuits alleging fraud on JPMorgan Chase’s part. They both are working their way through the federal court system right now. However, JPMorgan Chase may not be the only carnage after the dust settles, The Justice Department could still file charges against JPMorgan and maybe even Jamie Dimon.
The author of the investigative piece for The Nation draws a few noteworthy conclusions from the new scheme. Mainly that tougher penalties may be in order for white collar crimes. Maybe prison terms for responsible executives could keep this from happening in the future.