JPMorgan Shareholders Unfazed by Possible $13B Settlement

NEW YORK (TheStreet) -- JPMorgan's (JPM) stock continues to perform strongly, even as a spat of possible legal settlements cuts at the profitability of the nation's largest bank by assets.

JPMorgan is reportedly in the process of finalizing a $13 billion settlement with the U.S. Department of Justice over the bank's practices in underwriting mortgages prior to the collapse of the housing market in 2008. The prospective settlement is reported by The New York Times to include $9 billion in fines and $4 billion in relief to homeowners and will leave open a parallel criminal probe brought forward by the State of California into the firm's mortgage underwriting practices, a legal issue the bank disclosed in a second quarter 10-Q filing with the Securities and Exchange Commission.

It remains unclear whether JPMorgan is willing to make any admissions of guilt, according to the reports. The $13 billion figure is higher than previous reports of an $11 billion settlement and is reported to allow the criminal probe from California to move forward. The Times reports JPMorgan may assist regulators with ancillary probes.

A settlement would likely involve mortgages originated by JPMorgan and businesses it acquired during the financial crisis such as Washington Mutual and investment bank Bear Stearns. In acquiring WaMu in 2008, JPMorgan took over $190 billion in mortgage securities that had been taken over by the Federal Deposit Insurance Corporation.

Joshua Rosner, a banking analyst at Graham Fisher & Co. questioned in a March report why the bank had ended a program of reserving representation and warranty reserves for its acquired WaMu assets.

Claims between the bank and the Federal Housing Finance Authority would also likely be resolved in the settlement. Bank of America  (BAC) is reported to be in the process of a $6 billion settlement with the FHFA, according to media reports.

Overall, a settlement could resolve claims with the DoJ, FHFA, HUD and New York State Attorney Genera's Office.

"While the settlement is a step forward for JPM in reducing the uncertainty generated by its legal issues, press reports suggest that the agreement - as it is currently structured - does not include a waiver of future criminal liability. We consider this a material issue for investors as the settlement would not then offer the increased certainty that such a waiver would provide shareholders." Matthew Burnell, a banking analyst at Wells Fargo said in a Monday client note.

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