The Federal Housing Finance Agency (FHFA
has released details about its portion of the $13 billion settlement with JP
Morgan Chase (JPM) announced last week by the U.S. Department of Justice. The suit resolves several claims of alleged
violations of federal and state securities laws in connection with
private-label residential mortgage-backed securities purchased by Freddie Mac
and Fannie Mae (the GSEs) in the years leading up to the financial crisis. The GSEs will receive $4 billion from the
suit, $2.74 billion of which will go to Freddie Mac and $1.26 billion to Fannie
FHFA also announced a separate agreement
that will resolve representation and warranty claims arising out of the
purchase by the GSEs of single family loans.
That settlement will result in an additional $1.1 billion payment from
JPM to the GSEs, $670 million to Fannie Mae and $480 million to Freddie Mac.
Claims leading to the larger settlement
involve nearly 130 securities issued by JPM, Bear Stearns & Company and
Washington Mutual (WaMu). JPM acquired
the latter two companies in 2008 as Bear Stearns faced bankruptcy and WaMu was
seized by the Federal Deposit Insurance Corporation. About 80 percent of the claims are said to
have involved securities issued by the two failed companies.
Under terms of the agreement JPM does
not admit to any wrongdoing or liabilities.
The settlement does not indemnify the company from pending criminal
actions in federal courts.
FHFA Acting Direction Edward J. DeMarco
said, "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. 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 4 of the
18 PLS suits it filed in 2011. The
agency said it remains committed to satisfactory resolution of the pending