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JPMorgan's $13B Settlement: What Will Consumers Get?

The Justice Department and JPMorgan have reached a possible $13 billion settlement over civil charges that the bank sold bad mortgage loans to investors prior to the mortgage crisis.

According to Reuters, this record-setting deal won't release JPMorgan from criminal liability from some mortgages that were packaged into bonds and sold to investors. But it will go a long way toward reducing the financial institution's troubles with the federal government.

That's all well and good for JPMorgan, but what does this mean for consumers?

JPMorgan Settlement Details

The $13 billion deal would settle many of JPMorgan's civil charges. CNN reports that $4 billion of that amount will be earmarked for "consumer relief." Those who may have been left in the lurch with loan modifications after the mortgage crisis may be included in this consumer relief fund.

Like all settlements, both parties will need to wait for court approval before moving forward on this tentative deal, although this is a positive step forward for many distrustful of the banking industry.

And trust will be required, as each party will need to convince the court that the terms of their deal were hammered out in good faith.

Although this deal will not cover any criminal charges, The New York Times reports it is expected to settle federal cases in Pennsylvania, state cases in New York and California, and claims with a credit union association.

How Much for Consumers?

According to CNN, JPMorgan pocketed $21.3 billion in net income in 2012 and has assets in the trillions, so it shouldn't take long for the bank to come up with the funds.

If the $13 billion settlement is approved, about $6 billion "will serve as compensation for investors like pension funds that suffered losses," according to the Times. Another $4 billion will "go to help homeowners struggling with their mortgages," though details are not yet finalized, The Washington Post reports. The remaining $3 billion would represent a fine.

While this tentative settlement is a positive step toward consumer compensation, it may be years until any of the $4 billion is authorized to help those left hurting by JPMorgan after the mortgage crisis.

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