The Federal Housing
Finance Agency announced Friday it has reached a settlement with J.P. Morgan Chase
& Co. for $4 billion to address claims of alleged violations of federal and
state securities laws in connection with residential mortgage backed securities
purchased by Fannie Mae and Freddie Mac.
Under the terms of
the agreement, J.P. Morgan will pay about $2.74 billion to Freddie Mac and
$1.26 billion to Fannie Mae to resolve claims related to securities sold to the
company between 2005 and 2007 by J.P. Morgan, Bear Stearns & Co. Inc., and
Washington Mutual.
In separate settlements,
J.P. Morgan resolved claims with Fannie Mae and Freddie Mac related to
single-family mortgage purchases. Under the terms of the agreements, J.P.
Morgan Chase Bank will pay a total of about $1.1 billion – $670 million to
Fannie Mae and $480 million to Freddie Mac.
“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,” said FHFA Acting Director Edward J. DeMarco.
“This is a
significant step as the government and J. P. Morgan Chase move to address
outstanding mortgage-related issues,” DeMarco said. “Further, I am pleased that
a resolution of single family, whole loan representation and warranty claims
could be achieved at the same time. This, too, will have a beneficial impact
for taxpayers and the housing finance market.”
FHFA has now settled
four of the 18 mortgage backed securities suits it filed in 2011.
FHFA became the conservator
of Fannie Mae and Freddie Mac in 2008 when the collapse of the housing market resulted
in huge losses for the companies. As conservator, the agency assumed the
powers of the shareholders, directors, and officers, with the goal of conserving
the assets of Fannie Mae and Freddie Mac and putting them in a sound financial
condition.
Fannie Mae and Freddie Mac are companies that buy mortgages from
banks and other financial institutions then repackage them as mortgage backed
securities.
