The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, said Friday it struck a $ 5.1 billion deal with JPMorgan Chase over mortgage practices, rather than wait for the Justice Department to finalize its tentative $ 13 billion deal with the bank.
Until now, FHFA had agreed to bundle its lawsuit against the bank into a global settlement that federal prosecutors have been working on for months. The back and forth proved too much for the housing regulator, which decided to take matters into its own hands, said a person familiar with the deal who was not authorized to speak publicly.
It has been two years since FHFA first sued JPMorgan, along with 17 other financial firms, on behalf of the government-controlled Fannie Mae and Freddie Mac. The regulator accused the firms of misleading the mortgage finance twins about the quality of the mortgages pooled into securities. When those mortgages soured, the securities were worthless and saddled Fannie Mae and Freddie Mac with billions in losses.
Friday's deal calls for JPMorgan to pay about $ 2.7 billion to Freddie Mac and $ 1.3 billion to Fannie Mae to resolve claims related to securities sold to the companies between 2005 and 2007 by the bank and two firms it acquired, Bear Stearns and Washington Mutual.
In separate agreements, JPMorgan agreed to pay Fannie Mae $ 670 million and $ 480 million to Freddie Mac to resolve disputes over the purchase of single-family mortgages.
In a statement, JPMorgan said that the settlement is "an important step towards a broader resolution of the firm’s [mortgage backed securities-related] matters."
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