JPMorgan to pay out $5.1B to GSEs, FHFA

Settlement resolves putback claims, legacy mortgage issues

JPMorgan Chase (JPM) will be paying a total of $5.1 billion to resolve outstanding mortgage issues with the Federal Housing Finance Agency and the two government-sponsored enterprises, Fannie Mae and Freddie Mac.

The two agreements were announced Friday afternoon.

As part of the settlements, JPMorgan Chase agreed to pay $2.74 billion to Freddie Mac to resolve outstanding claims over securities sold to the GSEs by JPMorgan Chase, and affiliated firms, Bears Stearns & Co. and Washington Mutual.

In addition, the lender will pay $1.26 billion to Fannie Mae to resolve the same legacy mortgage issues. In total, the bank will be paying out $4 billion to address allegations over securities law violations.

Fannie Mae and Freddie Mac reached separate agreements with JPMorgan Chase to resolve outstanding repurchase claims over toxic mortgages, with the mega bank agreeing to pay $1.1 billion to resolve putback claims from the GSEs.

JPMorgan agreed to pay Fannie Mae $670 million in the fourth quarter in exchange for being released from all repurchase liability on the loans in question.

Furthermore, the bank will pay $480 million to Freddie Mac to resolve claims of reps and warrants violations.  

The loans in question were originated in the 2000 through 2008 period.

"This agreement appropriately resolves our repurchase claims, compensates taxpayers for losses fairly and allows Fannie Mae and J.P. Morgan Chase to move forward as strong business partners," said Timothy J. Mayopoulos, President and CEO of Fannie Mae.

"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 Ed DeMarco, FHFA's acting director. "This is a significant step as the government and J. P. Morgan Chase move to address outstanding mortgage-related issues."

The agreement came just days after early reports suggested the bank could be paying as much as $6 billion to resolve legacy mortgage issues, raised by FHFA and the enteprises.

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