NEW YORK (REUTERS) - JPMorgan Chase & Co has agreed to pay US$5.1 billion (S$6.3 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 on Friday evening that the settlement was expected to be part of a tentative US$13 billion deal that JPMorgan was 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 US$4 billion that was expected as part of the larger deal but also an additional US$1.15 billion to cover separate issues over home loans.
The US$4 billion portion of the payment, which was agreed on several weeks ago according to people familiar with the negotiations, would resolve a two-year-old lawsuit in which the regulator accused JPMorgan of overstating the quality of loans in mortgage securities it 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 US$1.1 billion 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.
The US$13 billion settlement is also expected to include a US$2 billion enforcement penalty for JPMorgan's mortgage securities sales, which are being investigated by federal prosecutors in California; US$4 billion of consumer debt relief; and US$3 billion in assorted payments and compensation sought by other government agencies.