The Federal Housing Finance Agency reached settlements worth $5.1 billion with JPMorgan Chase & Co. in connection with residential mortgage-backed securities and single-family mortgages purchased by Fannie Mae and Freddie Mac, the agency announced today.
JPMorgan agreed to pay $4 billion—$1.26 billion to Fannie Mae and $2.74 billion to Freddie Mac—to address claims that the company violated federal and state securities laws when it sold securities to the companies between 2005 and 2007. That settlement includes securities sold by JPMorgan, Bear Stearns Cos. Inc. and Washington Mutual.
JPMorgan also agreed to pay $1.1 billion—$670 million to Fannie Mae and $480 million to Freddie Mac—to resolve representation and warranty claims related to single-family mortgage purchases by the two companies. The deal is reportedly part of a larger $13 billion settlement that JPMorgan is preparing to make with the U.S. Department of Justice.
"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," FHFA Acting Director Edward DeMarco said in a written statement. "This is a significant step as the government and J. P. Morgan Chase move to address outstanding mortgage-related issues."
In the deal with the FHFA, JPMorgan did not admit liability or wrongdoing. The terms also said the settlement was not an admission or concession from JPMorgan of any alleged liability of Washington Mutual Bank, which collapsed in 2008.
JPMorgan is fighting allegations in Washington federal district court that the company is liable for WaMu's shoddy securities. The bank's lawyers at Sullivan & Cromwell are pointing fingers at the Federal Deposit Insurance Corporation. The plaintiff, Deutsche Bank, is suing JPMorgan and the FDIC.
Alfred Pollard, the housing agency's general counsel, lauded the work of Quinn Emanuel Urquhart & Sullivan, which sued on behalf of the FHFA. Philippe Selendy, who lead Quinn's securities and structured finance practice, said in a written statement the firm will continue to pursue FHFA’s claims against the defendants in eleven remaining cases.
"After more than two years of hard-fought litigation in the federal district and appellate courts, this landmark $4 billion settlement with J.P. Morgan is a clear victory for the integrity of the financial markets and the American taxpayer," Selendy said.
Pollard also credited the "strong work" of the FHFA Office of General Counsel's litigation group under Stephen Hart and the legal and business teams at Freddie Mac and Fannie Mae.
Matthew Huisman contributed to this report.