JPMorgan Chase to Pay Fannie, Freddie $5.1B in Deal Over Bad Mortgages

JPMorgan Chase to Pay Fannie, Freddie $5.1B in Deal Over Bad MortgagesJPMorgan Chase will pay $5.1 billion to settle allegations it violated federal and state securities laws by misleading mortgage-finance giants Fannie Mae and Freddie Mac regarding the quality of residential mortgages.
The independent regulator over Fanne and Freddie, the Federal Housing Finance Agency, announced the anticipated deal Friday.
The private-label, residential mortgage-backed securities were purchased by Fannie Mae and Freddie Mac during the real estate boom that led to the housing market collapse.
JPMorgan Chase will pay about $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae — a total of $4 billion — to resolve certain claims related to securities sold to the companies between 2005 and 2007 by J.P. Morgan Chase, and its Bear Stearns and Washington Mutual units.
The New York-based bank alo agreed to pay about $1.1 billion to Fannie and Freddie to fund repurchase claims on single-family mortgages bought by the two agencies.
Fannie and Freddie became wards of the federal government to avoid collapse at the height of the financial crisis five years ago.
“The satisfactory resolution of the private-label securities litigation with J.P. Morgan 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. This is a significant step as the government and J. P. Morgan Chase move to address outstanding mortgage-related issues,” said FHFA Acting Director Edward J. DeMarco.
The Fannie-Freddie settlement is expected to be the first phase in a $13 billion overall mortgage-related settlement between JPMorgan — the nation’s largest bank — and federal prosecutors and government agencies.
JPMorgan said Friday’s settlements “are an important step towards a broader resolution of the firm’s (mortgage-backed securities) related matters with governmental entities, and reflect significant efforts by the Department of Justice and other federal and state governmental agencies.”
Under a yet-to-be-finalized deal reached with Attorney General Eric Holder, the bank is expected to pay an additional roughly $2 billion in fines, $4 billion in consumer relief and $3 billion for investors who bought mortgage-backed securities that became toxic.

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