JPMorgan Chase has reached an agreement to resolve all of its mortgage-backed securities (MBS) litigation with the Federal Housing Finance Agency (FHFA) as conservator for Freddie Mac and Fannie Mae for $4 billion. This settlement resolves the firm's largest MBS case and relates to approximately $33.8 billion of securities purchased by Fannie Mae and Freddie Mac from J.P. Morgan, Bear Stearns and Washington Mutual. The firm has also simultaneously agreed to resolve Fannie Mae's and Freddie Mac's repurchase claims associated with whole loan purchases from 2000 to 2008, for $1.1 billion.In a statement the bank said the settlements totaling $5.1 billion 'are an important step' towards a broader resolution of the firm's MBS-related matters with governmental entities.
Fredddie Mac said, "On October 25, 2013, Freddie Mac, Fannie Mae and FHFA entered into an agreement with JPMorgan Chase & Co. and certain affiliated entities (collectively, "JPMorgan") and other persons to settle litigation previously initiated by FHFA against JPMorgan relating to investments by Freddie Mac and Fannie Mae in certain residential non-agency mortgage-related securities largely originated, issued or underwritten by JPMorgan.Under the settlement, JPMorgan will make a total payment of $4 billion, of which approximately $2.74 billion is expected to be paid to Freddie Mac.
"On October 25, 2013, Freddie Mac entered into an agreement with JPMorgan Chase Bank, National Association ("Chase") under which Freddie Mac will, subject to specified limitations and exclusions, release Chase from certain existing and future loan repurchase obligations relating to approximately 1.8 million loans purchased by Freddie Mac between 2000 and 2008, as well as certain other obligations.In exchange, Chase agreed to pay Freddie Mac a total of $480 million (less credits up to $60 million for repurchases already made and for reconciling adjustments).The agreement was approved by FHFA, as Freddie Mac's Conservator.
Fannie Mae announced that it has reached an agreement with J.P. Morgan Chase & Co. to resolve requests that J.P. Morgan Chase repurchase certain loans originated from 2000-2008. As a result, J.P. Morgan Chase will make a $670 million payment to Fannie Mae in the fourth quarter of 2013 and be released from repurchase liability for these loans, with certain exceptions.
"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. "One of our goals in 2013 was to put legacy issues behind us so we can focus on building a stronger housing finance system for the future. We have made significant progress, and will continue working with our customers to bring our representation and warranty claims to a satisfactory close."
J.P. Morgan Chase will remain obligated for certain other contractual responsibilities under the resolution agreement. Separately, the Federal Housing Finance Agency has announced a settlement with J.P. Morgan Chase over legal claims relating to private label securities that Fannie Mae purchased, which will result in an additional payment of $1.26 billion to Fannie Mae in the fourth quarter of 2013.
The Federal Housing Finance Agency (FHFA), as conservator of FannieMae and Freddie Mac, today announced it has reached a settlement with J.P. Morgan Chase & Co. and related companies for $ 4 billion to address claims of alleged violations of federal and state securities laws in connection with private-label, residential mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac. Under the terms of the agreement, J.P. Morgan Chase & Co. will pay approximately $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae to resolve certain claims related to securities sold to the companies between 2005 and 2007 by J.P. Morgan Chase & Co., Bear Stearns & Co., Inc. and Washington Mutual.
In separate settlements, J.P. Morgan Chase & Co. resolved representation and warranty claims with Fannie Mae and Freddie Mac related to single-family mortgage purchases by the two companies. Under the terms of the agreements, J.P. Morgan Chase Bank N.A. will pay a total of approximately $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. This is a significant step as the government and J. P. Morgan Chase move to address outstanding mortgage-related issues," said FHFA Acting Director Edward J. DeMarco. "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's General Counsel noted, "Our lead representation by Philippe Selendy and the firm of Quinn Emanuel Urquhart & Sullivan was central to reaching this landmark settlement and their work continues in the remaining PLS cases. I want to cite 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.
"The settlement of the PLS litigation was initiated by U.S. District Court Judge Denise Cote's direction to undertake mediation of the PLS cases under her jurisdiction. The settlement also is aligned with the working group of federal and state authorities addressing claims related to private-label securities and FHFA has and continues to work with all the government entities involved."
FHFA has now settled four of the 18 PLS suits it filed in 2011, and remains committed to satisfactory resolution of the pending actions.