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Here's How Some Homeowners Will Benefit From JPMorgan's Big Settlement

Nov 20, 2013, 02:11 IST

REUTERS/Yuri Gripas

Of the $13 billion that JP Morgan will pay to settle mortgage fraud charges, $4 billion will go to distressed homeowners.

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More specifically, $1.5 billion will go specifically to JPM, Washington Mutual, or Bear Sterns borrowers that are under water - the value of their homes is less than that of their mortgages.

The rest of the $4 billion can be used in a variety of ways for customers or communities impacted by the crisis - which ones, however, has yet to be worked out, according to WaPo.

JP Morgan will have to hire an independant monitor to make sure that all this goes down nice and clean.

Options for additional relief include lowering interest payments on existing loans, or originating brand new loans that JPM will keep on its books (not sell to investors). $300-$500 million of settlement should go to restructuring mortgages, according to the settlement.

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New York state alone will get $1 billion of the settlement, including $613 million in cash and approximately $400 million in consumer relief, according to the New York Attorney General's office.

"Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy," said Attorney General Schneiderman, co-chair of the RMBS working group. "This historic deal, which will bring long-overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do. We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we've won a major victory today in the fight to hold those who caused the financial crisis accountable."

According to the WSJ, this consumer relief portion was a sticking point in settlement talks.

If JPM doesn't pay this money out by 2016, JPMorgan has to pay an amount equal to the unexpended funds either to the government or to a third party designated by the government, like a non-profit.

Of course, this doesn't end JP Morgan's legal troubles. They still have to clear up issues surrounding their business convicted Ponzi schemer Bernie Madoff, and address questions about its hiring of family members connected to the ruling Communist party in China.

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