JP Morgan to pay $5.1 b to settle mortgage claims

PTI Updated - March 12, 2018 at 09:29 PM.

JPMorgan Chase will pay $5.1 billion to settle the charges that it overstated the quality of mortgages and mortgage-backed securities sold to Freddie Mac and Fannie Mae, US officials have said.

The Federal Housing Finance Agency, which regulates the two government-backed financing giants, had accused the bank, and the two subsidiaries, Bear Stearns and Washington Mutual, of causing “billions of dollars” in losses to the two mortgage finance companies.

Mortgage-related violations

The settlement has resolved part of the tab as the US’s biggest bank by assets proceeds with negotiations with the US over a broader pact to resolve mortgage-related violations.

The larger ($4.0 billion) of the two settlements relates to $33.8 billion in residential mortgage-backed securities sold by JPMorgan to Fannie and Freddie between 2005 and 2007, according to the FHFA’s 2011 complaint.

JPMorgan “falsely” told Freddie and Fannie that the underlying mortgages met the two agencies’ standards for quality. In practice, the assets were much lower quality than claimed.

The FHFA said that “constitutes negligent misrepresentation, common law fraud and aiding and abetting fraud,” the FHFA complaint said.

The settlement relates to securities sold to Fannie and Freddie by JPMorgan itself and also by Bear Stearns and Washington Mutual, which were acquired by JPMorgan in 2008.

FHFA Acting Director Edward J. DeMarco said the settlement: “provides greater certainty in the marketplace and is in line with our responsibility of preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers.”

“This is a significant step as the Government and JPMorgan Chase move to address outstanding mortgage-related issues.”

A JPMorgan statement called yesterday’s agreement “an important step towards a broader resolution of the firm’s (mortgage-backed securities)-related matters with governmental entities.”

Published on October 26, 2013 06:00