The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, has announced it has reached a settlement with JP Morgan Chase & Company and related companies for $ 4 billion to address claims of alleged violations of federal and state securities laws in connection with private-label, residential mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac. Under the terms of the agreement, Chase will pay approximately $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae to resolve certain claims related to securities sold to the companies between 2005 and 2007 by JP Morgan Chase, Bear Stearns and Washington Mutual.
In separate settlements, Chase resolved representation and warranty claims with Fannie Mae and Freddie Mac related to single-family mortgage purchases by the two companies. Under the terms of the agreements, J.P. Morgan Chase Bank N.A. will pay a total of approximately $1.1 billion—$670 million to Fannie Mae and $480 million to Freddie Mac.
“The satisfactory resolution of the private-label securities litigation with JP 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 JP Morgan Chase move to address outstanding mortgage-related issues,” said FHFA Acting Director Edward J. DeMarco. “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.”
FHFA’s General Counsel noted, “Our lead representation by Philippe Selendy and the firm of Quinn Emanuel Urquhart & Sullivan was central to reaching this landmark settlement and their work continues in the remaining PLS cases. I want to cite the strong work of the FHFA Office of General Counsel’s litigation group under Stephen Hart and the legal and business teams at Freddie Mac and Fannie Mae.
“The settlement of the PLS litigation was initiated by U.S. District Court Judge Denise Cote’s direction to undertake mediation of the PLS cases under her jurisdiction. The settlement also is aligned with the working group of federal and state authorities addressing claims related to private-label securities and FHFA has and continues to work with all the government entities involved.”