The California negotiations initially broke down over the amount the bank would pay as a penalty, sources said.
Meanwhile, the Department of Housing and Urban Development took issue on Tuesday with a report in another publication that the agency was seeking a $20 billion settlement from the bank over its mortgage practices. The housing agency said that was "categorically false."
"The department takes the allegations against JPMorgan Chase seriously and has been involved in multi-party negotiations to reach a settlement. However, no one at this agency - including the secretary - ever floated a $20 billion settlement figure," HUD general counsel Helen Kanovsky said.
The planned California litigation did not involve HUD, and that agency's involvement in the talks suggest that both the bank and the government want to resolve multiple investigations in a larger settlement, according to people familiar with the matter.
Experts said the new move toward settlement talks appeared to be driven by a strong desire within the bank to move past its legal troubles as quickly as possible, but the Justice Department likely has the upper hand in the talks, given how close it came to filing the suit.
(Read more: JPMorgan may settle with group of agencies)
In a regulatory filing in August, JPMorgan disclosed it was under parallel civil and criminal investigations by federal authorities in California and that the authorities on the civil side told the bank in May they had preliminarily concluded it violated federal securities laws.
To observers, another legal battle is the last thing the largest U.S. bank needs as it struggles to move past conflicts with regulators and prosecutors involving several business lines.
"The way I see this, JPMorgan would like to avoid the continuing Chinese water torture of reputational damage they've been suffering," said Kathleen Wailes, senior vice president at LEVICK, a public relations and crisis-management firm in Washington.