JPMorgan Chase reached agreements to resolve its mortgage-backed securities (MBS) litigation with theFederal Housing Finance Agency (FHFA) and rep and warranty repurchase claims from Fannie Mae and Freddie Mac.
Altogether, the bank has agreed to pay $5.1 billion—$4 billion to address FHFA’s claims of alleged violations of federal and state securities laws in connection with private-label securities (PLS) purchased by the GSEs and another $1.1 billion to cover repurchase claims on whole loans sold to the GSEs between 2000 and 2008.
The $4 billion payment relates to approximately $33.8 billion of securities sold to Fannie and Freddie between 2005 and 2007 by JPMorgan, Bear Stearns, and Washington Mutual. The bank says the “settlement resolves the firm’s largest MBS case.” Under the terms of the agreement, approximately $2.74 billion will go to Freddie Mac and $1.26 billion to Fannie Mae.
“The satisfactory resolution of the private-label securities litigation with JPMorgan Chase & Co. provides greater certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” saidFHFA Acting Director Edward J. DeMarco. “This is a significant step as the government and JPMorgan Chase move to address outstanding mortgage-related issues.”
This is the fourth resolution reached out of 18 lawsuits filed by FHFA in 2011 against banks over MBS dealings prior to the crisis.
In separate settlements, JPMorgan Chase resolved representation and warranty claims with Fannie Mae and Freddie Mac related to single-family mortgage purchases by the two companies. Under the terms of the agreements, the bank will pay $670 million to Fannie Mae and $480 million to Freddie Mac.
Freddie Mac’s CEO Donald H. Layton said the settlements “represent solid progress” in the GSE’s “efforts to resolve legacy issues and recoup funds that are due to America’s taxpayers.” Likewise, Fannie Mae’s CEO Timothy J. Mayopoulos said the agreement “compensates taxpayers for losses fairly” and at the same time “allows Fannie Mae and JPMorgan Chase to move forward as strong business partners.”
JPMorgan said in a statement, “Today’s settlements totaling 5.1 billion dollars are an important step towards a broader resolution of the firm’s MBS-related matters with governmental entities, and reflect significant efforts by the Department of Justice and other federal and state governmental agencies.”