JPMorgan $13 billion mortgage settlement expected Tuesday - sources

By Aruna Viswanatha and David Henry

WASHINGTON/NEW YORK (Reuters) - JPMorgan Chase & Co is expected to sign a $13 billion agreement with the U.S. government on Tuesday to settle claims it overstated the quality of mortgages sold to investors during the housing boom, two people familiar with the matter said.

The civil settlement would mark the end of weeks of tense negotiations between JPMorgan Chase, the largest U.S. bank, and government agencies under pressure to hold banks accountable for wrongdoing that led to the housing crisis.

Even after the settlement, the bank faces at least nine other government investigations, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate.

JPMorgan Chase and government agencies led by the Justice Department had reached a tentative agreement in mid-October and have been hammering out details since then.

Earlier this week the bank and officials at the U.S. Justice Department and U.S. Department of Housing and Urban Development agreed to terms of a $4 billion relief package that is part of the broader deal, paving the way for the full announcement.

Of the $4 billion, about $1.5 billion is for the bank to write down the value of loans on its books, effectively forgiving some borrower debt. As much as $500 million more would go to change the terms of loans to lower monthly payments.

The remaining $2 billion would go for assorted measures, including new loans for low- and moderate-income borrowers in areas that have been hard-hit by the housing crisis and for demolishing abandoned homes, a source said.

Last month the Federal Housing Finance Agency announced a related $5.1 billion deal to resolve claims about the quality of mortgage bonds it sold, $4 billion of which is part of the expected announcement.

JPMorgan's negotiations with the Justice Department began in earnest last spring, after Justice Department lawyers in California reached a preliminary conclusion that the bank had violated U.S. civil laws. The Justice Department looked into mortgage bonds the bank had sold from 2005 through 2007, the company disclosed in August.

(Reporting by Aruna Viswanatha in Washington and David Henry in New York, Editing by Dan Wilchins, Gerald E. McCormick and Jeffrey Benkoe)