JPMorgan Chase said it is under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the US Justice Department has already concluded broke civil laws.
The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and “Alt-A” loans, which were sold to investors from 2005 through 2007, JPMorgan said on Wednesday.
The office of US Attorney Benjamin Wagner in Sacramento, California, has been conducting civil and criminal inquiries, the bank said.
Investigators are seeking to wrap up lengthy probes of abuses that fueled the housing collapse and led global credit markets to freeze in 2008. This week, the US Justice Department and Securities and Exchange Commission sued Bank of America, the nation’s second-biggest lender, accusing it of misleading investors in an US$850 million mortgage-backed bond.
The US is investigating JPMorgan under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), according to a person briefed on the matter. JPMorgan “continues to respond to other MBS-related regulatory inquiries,” the New York-based company wrote in a regulatory filing listing investigations.
Federal and state authorities have sent subpoenas and requests for information about its origination and purchase of mortgages, and the packaging of debts into bonds, the bank said. Investigators asked about the “treatment of early payment defaults, potential breaches of securitization representations and warranties, reserves and due diligence in connection with securitizations,” it said.