NEW YORK - JPMorgan Chase & Co. will pay $5.1 billion to resolve claims over faulty investments sold to mortgage giants Fannie Mae and Freddie Mac in the lead-up to the financial crisis.
The Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the deal late Friday.
The $5.1 billion sum is part of a total $13 billion settlement between JPMorgan and the federal government that has been in the works and which could be announced in coming days. The timing was still unclear, according to a person familiar with the matter but who was not authorized to speak publicly.
The agreement would resolve claims that JPMorgan and two troubled banks it purchased during the financial crisis - Bear Stearns and Washington Mutual - packaged bad loans and then sold residential mortgage-backed securities that later went south.
Under the deal, JPMorgan will pay $2.74 billion to Freddie and $1.26 billion to Fannie. In a separate settlement, the bank will also resolve “representation and warranty claims” by paying $1.1 billion more to both entities.
“This is a significant step as the government and J.P. Morgan Chase move to address outstanding mortgage-related issues,” Edward DeMarco, the FHFA’s acting director, said in a statement. “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.”
In a statement, JPMorgan said the settlement would resolve the bank’s largest case involving mortgage-backed securities. The claims relate to about $33.8 billion in mortgage securities Fannie and Freddie purchased from JPMorgan as well as Bear Stearns and Washington Mutual.
“Today’s settlements totaling $5.1 billion are an important step towards 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,” JPMorgan said in a statement.
The settlement announced Friday does not include $4 billion of the broader $13 billion settlement earmarked for homeowner relief, said the person familiar with the matter.