UPDATE 3-JPMorgan, SEC in $720 mln muni bond settlement

* Two former bankers also charged in Alabama case

* Jefferson County faces multibillion dollar debt

* JP Morgan is county's main creditor (Revises first paragraph, adds JP Morgan statement, details)

By Melinda Dickinson

BIRMINGHAM, Ala., Nov 4 (Reuters) - J.P. Morgan Securities Inc. (JPM.N: Quote, Profile, Research) reached agreement for more than $720 million with the Securities and Exchange Commission to settle charges in an unlawful payment scheme in the sewer financing of Jefferson County, Alabama.

The bank will pay $75 million and forfeit more than $647 million it claimed in bond swap termination fees, the U.S. agency announced in Washington on Wednesday.

The settlement could have a big impact on the county's debt of around $4 billion, of which the bank was the largest creditor. The debt threatens to force the county into the biggest municipal bankruptcy in U.S. history.

The SEC said the bank would pay a penalty of $25 million and would pay $50 million to the county, which includes Birmingham, Alabama's largest city.

Jefferson County accumulated its debts earlier this decade through swap and other bond deals to finance improvements to its sewer system.