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MARKETS APPROACH NORMALCY AS CRISIS ENTERS 'NINTH INNING' JPMORGAN REACHES $13B RMBS SETTLEMENT WITH FEDS JPMorgan Chase struck a deal with the U.S. Department of Justice to resolve civil claims from both federal and state officials over residential mortgage-backed securities (RMBS) issued prior to January 1, 2009, by the bank and two financial institutions it acquired in 2008—Bear Stearns and Washington Mutual. The $13 billion settlement is the largest in American history between the U.S. government and a single entity. Under the agreement reached, JPMorgan will pay $9 billion in restitution and provide an additional $4 billion in relief for homeowners at risk of foreclosure and communities impacted by the housing crisis. Federal officials say the relief funding could benefit more than 100,000 borrowers. According to JPMorgan, the cash portion of the settlement payment consists of a $2 billion civil monetary penalty and $7 billion in compensatory payments, including a previously announced $4 billion payment to resolve litigation claims from the Federal Housing Finance Agency. Borrower relief will be in the form of principal reduction, forbearance, and other direct benefits from various relief programs, the bank explained. JPMorgan Chase has committed to complete delivery of the promised relief to borrowers before the end of 2017. The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage- 18 backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis. New York Attorney General Eric T. Schneiderman co-chairs the RMBS Working Group. The settlement with JPMorgan Chase comes 13 months after Schneiderman sued the bank for fraudulent RMBS packaged and sold by Bear Stearns before it was acquired by JPMorgan at the urgent behest of government officials at the Federal Reserve, FDIC, and U.S. Treasury. In announcing the unprecedented settlement, Schneiderman said, "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. This historic deal … is exactly what our working group was created to do." Separately, the FDIC announced it also reached a settlement with JPMorgan Chase and its affiliates in relation to the failure of six banks. The FDIC, acting as receiver for the failed institutions, said misrepresentations where made in the offering documents for 40 RMBS purchased by the now-defunct banks. JPMorgan agreed to pay $515.4 million, which will be distributed among the receiverships for the failed Citizens National Bank (failed May 22, 2009), Strategic Capital Bank (May 22, 2009), Colonial Bank (August 14, 2009), Guaranty Bank (August 21, 2009), Irwin Union Bank and Trust Company (September 18, 2009), and United Western Bank (January 21, 2011). JPMorgan Chase says it is fully reserved to cover the costs of the global settlement. The national foreclosure crisis is reaching its end as many markets work their way toward normalcy, according to the latest U.S. Foreclosure Market Report from RealtyTrac. As major evidence of this trend, RealtyTrac reports foreclosure starts reached a 95-month low in November. At the same time, overall foreclosure activity across the nation declined by 15 percent from October to November, while year-overyear, activity was down 37 percent, RealtyTrac found. The company says the monthly decrease is the largest on record since November 2010, and that decline of 21 percent three years ago took place alongside what RealtyTrac calls the "revelation of the so-called robo-signing scandal," which derailed foreclosure processes for many large banks. A total of 113,454 homes received foreclosure filings in November, accounting for one in every 1,155 homes in the country, RealtyTrac reports. While conceding that some of November's decline could be seasonal, Daren Blomquist, RealtyTrac VP, said, "The depth and breadth of the decrease provides strong evidence that we are entering the ninth inning of this foreclosure crisis with the outcome all but guaranteed." With foreclosures nationwide declining at such a significant rate, some real estate professionals are beginning to see a return to "normalcy" in their local markets. "Foreclosures continue to decline and it's beginning to feel like a 'normal' housing market again," Steve Roney, CEO of Prudential Utah Real Estate in Salt Lake City and Park City, told RealtyTrac. Similarly, Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa, said, "There will always be defaults, but it's clear that we are working our way back towards a normal housing market."

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