JPMorgan in $5.1 billion deal with housing agency

Fri Oct 25, 2013 7:24pm EDT
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By Aruna Viswanatha and David Henry

(Reuters) - JPMorgan Chase & Co has agreed to pay $5.1 billion to settle claims that it and firms it bought misled Fannie Mae and Freddie Mac about the quality of mortgage securities and home loans it sold to them during the housing boom.

The bank and the agencies' regulator said Friday evening that the settlement was expected to be part of a tentative $13 billion deal that JPMorgan is negotiating with federal and state agencies over its mortgage bond liabilities.

But the unusually timed announcement, which appeared to catch other parties involved in the negotiations by surprise, covered not only $4 billion that was expected as part of the larger deal but also an additional $1.15 billion to cover separate issues over home loans.

The $4 billion portion of the payment, which was agreed on several weeks ago according to people familiar with the negotiations, resolves a 2-year-old lawsuit in which the regulator accused JPMorgan of overstating the quality of loans in mortgage securities in sold to Fannie and Freddie.

The agency became impatient waiting for the larger settlement and wanted to move on to resolving similar lawsuits it brought against other banks, one person said.

The additional $1.1 million resolves claims that JPMorgan breached the representations it made about the quality of single-family mortgages it sold the government-sponsored entities, the regulator said.

Negotiations on the final terms of the larger settlement are continuing, people familiar with discussions said on Friday.

While the parties have agreed to the framework of the deal, talks have slowed over whether JPMorgan can shift onto the Federal Deposit Insurance Corp liabilities of Washington Mutual, a failed lender which JPMorgan took over during the financial crisis.   Continued...

A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar