According to The Wall Street Journal, J.P. Morgan Chase & Co. on Friday agreed to pay $5.1 billion in settlements with the regulator of mortgage-finance companies Fannie Mae FNMA +13.40% and Freddie Mac.FMCC +11.89%
The pact with the Federal Housing Finance Agency includes $4 billion to settle a lawsuit alleging the bank misled Fannie and Freddie about the quality of securities J.P. Morgan and two other banks it later acquired had sold to the housing-finance giants during the housing boom. The deal also includes $1.1 billion to settle separate demands from Fannie and Freddie that J.P. Morgan buy back loans that the housing-finance companies said had run afoul of their underwriting standards.
“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 DeMarco. Resolving the outstanding lawsuit “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.”
The suit is the fourth of 18 filed by the FHFA in 2011 to be settled.
The settlement comes as J.P. Morgan tries to put as many legal woes behind it as possible. In the third quarter, it set aside $9 billion in additional legal reserves, giving it a total of $23 billion to absorb future settlements and lawsuits. In the last month, J.P. Morgan also agreed to pay more than $1 billion to end an array of investigations into a 2012 trading debacle that cost the bank more than $6 billion and which raised questions about governance and oversight.