The Federal Housing Finance Agency (FHFA) [official website], acting in its capacity as conservator for Freddie Mac and Fannie Mae [corporate websites], on Friday announced a $5.1 billion settlement with JPMorgan Chase & Co. [corporate website]. The FHFA alleged [complaint, PDF] that JPMorgan misrepresented the quality of the sub-prime mortgages and mortgage securities sold to Fannie Mae and Freddie Mac, which resulted in several billion dollars' worth of damages when the housing bubble collapsed in 2008. JPMorgan settled [press release, PDF] representation and warranty claims for approximately $1.1 billion, with $480 million to Freddie Mac and $670 million to Fannie Mae, and is to pay $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae in a separate settlement to address allegations of violations of federal and state securities laws.
The FHFA sued 18 banks in 2011 for the misrepresentation of mortgage-backed securities [press releases, PDF] in connection with the housing bubble and subsequent sub-prime mortgage crisis [JURIST news archive], resulting in more than $200 billion in losses for Fannie Mae and Freddie Mac. JPMorgan is the fourth company to reach a settlement [CNN report] with the FHFA. In July UBS [corporate website] settled [press release] with FHFA for $885 million. The FHFA also settled with Citigroup in May and General Electric [Reuters reports] in January for undisclosed amounts.