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JPMorgan Chase reports it has completed nearly a quarter of its consumer relief obligations required under a landmark mortgage-backed securities (MBS) settlement last year.
According to a report issued Wednesday by the settlement's monitor, Joseph Smith Jr., the megabank expects to be credited for more than $862 million it provided through various borrower relief measures in the second quarter. Adding in an initial sampling of loans Chase submitted to review its credited relief calculations, the bank claims it has doled out more than $868 million in relief through various means.
While the 100-loan sample was validated in July, the second-quarter addition has yet to be approved by Smith's team, the monitor said.
"Chase will not receive credit under the settlement until I am satisfied it has met its obligations," Smith said. "Therefore, it would be premature to apply the $862 million in new relief."
Under the terms of last year's $13 billion settlement, Chase is required to provide $4 billion in credited relief through loan modifications, rate reductions, low- to moderate-income lending, and other programs by the end of 2017.
The settlement stemmed from accusations that Bear Stearns and Washington Mutual, both of which were acquired by Chase in 2008, misled investors to sell faulty MBS before the financial crisis. Chase is one of a small number of banks that have struck multibillion dollar agreements to resolve residential MBS claims, having been joined recently by Citi and Bank of America.
Going by gross calculations, the bank's internal review group says it has aided more than 46,400 borrowers in initiatives totaling a principal amount of $7.6 billion. Just in the second quarter, that figure includes loan modifications granted to nearly 7,000 borrowers and 39,500 loans granted to low- and moderate-income consumers.
Under the terms of the settlement, Chase receives credit in varying amounts based on how it focuses its consumer relief efforts. For example, for principal forgiveness granted on first- and second-lien loans, the bank receives $1 of credit for each dollar forgiven on loans held for investment. For each dollar forgiven on loans serviced for others, only 50 cents of credit is given.
