Confirming reports that began to emerge last week, JPMorgan Chase officially reached a settlement with the Department of Justice over allegations that the bank’s brokers charged higher interest rates to minority borrowers than white borrowers in the run-up and during the financial crisis.
Initial reports pegged the settlement amount at $55 million, but the actual settlement amount is slightly lower, checking in at $53 million.
According to the U.S. Attorney’s Office for the Southern District of New York, the settlement resolves allegations that JPMorgan Chase engaged in discrimination on the basis of race and national origin in the conduct of its wholesale lending business.
During the time period in question, from at least 2006 through 2009, Chase had thousands of independent mortgage brokers originating loans through its wholesale lending business, the DOJ said.
In that time, those wholesale brokers were responsible for approximately 360,000 mortgages.
Of those, Chase reported that approximately 40,000 wholesale loans were made to African-American borrowers and that approximately 66,000 wholesale loans were made to Hispanic borrowers, the DOJ said.
But of those 106,000 loans, an estimated 50,000 African-American and Hispanic borrowers paid higher rates and fees than similarly situated white borrowers, the DOJ continued.
According to the settlement agreement, in order to compensate the estimated 50,000 African-American and Hispanic borrowers who paid higher rates and fees than similarly situated white borrowers, Chase agreed to create a settlement fund in the amount of approximately $53 million.
Chase has also agreed to contract an administrator to manage the settlement fund and to locate borrowers who may qualify for compensation.
“Today’s settlement will compensate thousands of African-American and Hispanic borrowers who paid higher rates and fees on Chase mortgages than similarly situated white borrowers,” U.S. Attorney Preet Bharara said.
“In the settlement announced today, Chase admits the Government found that the bank’s wholesale lending brokers charged minority borrowers more than white borrowers in the same position,” Bharara continued. “Such unequal treatment is not only unfair, but a violation of the Fair Housing Act.”
Of the settlement, Chase said last week that it denied any wrongdoing.
From USA Today:
“We’ve agreed to settle these legacy allegations that relate to pricing set by independent brokers,” the company said in a statement. “We deny any wrongdoing and remain committed to providing equal access to credit.”