JP Morgan has agreed on a $13 billion settlement with the US Justice Department over the mis-selling of mortgage securities - the biggest settlement of its type in US financial history.

JP Morgan has agreed on a $13 billion settlement with the US Justice Department over the mis-selling of mortgage securities in the period leading up to the credit crunch. This is the biggest settlement of its type in US financial history.

“The Justice Department, along with federal and state partners, today [yesterday] announced a $13 billion settlement with [tag|JP Morgan|]JP Morgan[/tag] - the largest settlement with a single entity in American history - to resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS) by JPMorgan, Bear Stearns and Washington Mutual prior to Jan. 1, 2009,” the DOJ said in a statement.

“As part of the settlement, JP Morgan acknowledged it made serious misrepresentations to the public - including the investing public - about numerous RMBS transactions. The resolution also requires JPMorgan to provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country.  The settlement does not absolve JP Morgan or its employees from facing any possible criminal charges.

Of the $13 billion in total, $9 billion will be paid to settle federal and state claims, while $4 billion will be paid to mortgage consumers harmed by JP Morgan, the DOJ statement said.

“Abuses in the mortgage-backed securities industry helped turn a crisis in the housing market into an international financial crisis,” US Attorney for the Eastern District of California Benjamin Wagner, said in the statement.  “The impacts were staggering. JP Morgan sold securities knowing that many of the loans backing those certificates were toxic. Credit unions, banks and other investor victims across the country, including many in the Eastern District of California, continue to struggle with losses they suffered as a result,” he said.

According to a report by Reuters, JP Morgan's chief financial officer, speaking on a conference call, said the bank had not admitted to violating any laws. CFO Marianne Lake added that the facts the bank admitted to did not leave it vulnerable in other litigation. In other words, the bank and the government did not agree about what they had agreed to in the settlement, capping weeks of squabbling over the terms of the deal, the report said.