JPMorgan Chase (NYSE: JPM ) announced it had reached $5.1 billion in settlements with the Federal Housing Finance Agency (FHFA), Freddie Mac, and Fannie Mae, related to claims surrounding $33.8 billion of mortgage-backed securities purchased by Fannie Mae and Freddie Mac in the run-up to the housing bubble collapse.
Of the $5.1 billion in the settlement, $4 billion will be paid for violations of securities laws related to private-label mortgages purchased by Fannie Mae and Freddie Mac, which were sold by JPMorgan Chase, Bear Stearns, and Washington Mutual between 2005 and 2007. The remainder of the settlement is for representation and warranty claims associated with loans that Fannie Mae and Freddie Mac purchased between 2000 and 2008.
According to FHFA Acting Director Edward J. DeMarco:
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.
In the announcement, JPMorgan noted that the settlements "are an important step toward a broader resolution of the firm's MBS-related matters with governmental entities, and reflect significant efforts by the Department of Justice and other federal and state governmental agencies."
In its third-quarter earnings announcement, JPMorgan noted that it had set aside $9.2 billion for litigation reserves, and it was reported that it had also reached a settlement with the Justice Department for $13 billion last weekend.