The Justice Department and JPMorgan Chase & Co have reached agreement on all issues in a USD 13 billion settlement of a civil inquiry into the company's sales of low-quality mortgage-backed securities that collapsed in value in the financial crisis, a person close to the talks said.
The person said the documents spelling out the agreement could be signed as early as today.
The person spoke on condition of anonymity because the settlement has yet to be finalised.
Another person familiar with the talks, also speaking only on condition of anonymity, said the two sides were "very close" to a final agreement.
The deal is the largest ever reached between the government and a corporation. It eclipses the record USD 4 billion levied on oil giant BP in January in the worst offshore oil spill in US history.
The nation's biggest bank will pay more than USD 6 billion to compensate investors, pay USD 4 billion to help struggling homeowners and pay the remainder as a fine.
The final issue, one that was not resolved until yesterday, revolved around the USD 4 billion to compensate consumers.
According to the first person close to the talks, some USD 1.5 billion will be a write-down to reduce the principal of homeowner loans, USD 300 million will enable homeowners to pay less now on their mortgages and the remainder of the USD 4 billion will go toward reducing mortgage interest rates, originating new loans and helping revive blighted properties in some of the hardest hit areas of the housing crisis such as Detroit.
An independent monitor will be appointed to oversee the assistance to homeowners.
The deal is the latest chapter in the burst of the housing bubble in 2007 when bundles of mortgages sold by JPMorgan and other financial institutions left investors with billions of dollars in losses.
JPMorgan has said that most of its mortgage-backed securities came from Bear Stearns Cos and Washington Mutual Inc, troubled companies that JPMorgan acquired in 2008.
Still to come is a decision on whether the Justice Department will file criminal charges against JPMorgan. An investigation is under way by the US Attorney's office in Sacramento, California.
As part of the USD 6 billion to investors, USD 4 billion will resolve government claims that JPMorgan misled mortgage finance giants Fannie Mae and Freddie Mac about risky mortgage securities the bank sold them before the housing market crashed. That part of the deal was announced on Oct 25.
