JPMorgan Chase and US government officials have agreed on terms of a $4-billion consumer relief package that is to be part of a $13-billion deal to settle the banks liability to government agencies over mortgage securities, according to a person familiar with the matter.
The $4-billion portion of the deal would pay for write-downs of mortgage loans, demolition in blighted areas and lower monthly payments for homeowners, the person said on Monday.
Shaun Donovan, secretary of the US department of housing and urban development, was involved with the negotiations which have come under the umbrella of a broader settlement between the bank and the US department of justice, the person said.
Of the $4 billion, about $1.5 billion is to be earmarked for write-downs of loans that exceed the property value and as much as $500 million more would go for restructuring loans to lower monthly payments. The remaining $2 billion would go for assorted measures, including new loans for low- and moderate-income borrowers in areas that have been hard-hit by the housing crisis and demolition of abandoned homes, the person said.
The agreement is to require JPMorgan to spend the money by the end of 2016 under the watch of a independent monitor, the person said.
The final $13-billion deal is likely to be announced on Tuesday, the person said. Another source familiar with the matter said earlier in the day that that announcement could be in the next day or two. Both sources were not authorised to speak on the record about the matter. The total deal is also to include a $2-billion penalty and at least $4 billion for
federal housing finance agencies under a previously announced agreement.
The fact that the $13-billion deal would include $4 billion for some form of consumer relief has been known for weeks. The details of how the $4 billion would be spent were reported earlier on Monday by the Wall Street Journal.