This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Indemnification of WaMu Receivership Not Addressed In JPMorgan's FHFA Settlement

Updated from 6:00 p.m. to clarify JPMorgan's indemnification of Washington Mutual liabilities

NEW YORK (TheStreet) -- JPMorgan  (JPM) won't have to admit wrongdoing in a $5.1 billion settlement with the Federal Housing Finance Authority announced that resolves claims of alleged violations of federal and state securities laws in connection with the bank's sale of private-label, residential mortgage-backed securities to Fannie Mae (FNMA) and Freddie Mac (FMCC).

JPMorgan also agreed not to seek indemnification from the Federal Deposit Insurance Corporation in its corporate capacity for any liabilities associated with the bank's September 25, 2008 purchase of Washington Mutual.

Friday's settlement, however, doesn't pertain to the FDIC's receivership of WaMu. JPMorgan and the FDIC have butted heads on whether the bank assumed WaMu's legal liabilities when acquiring the firm out of receivership during the depths of the 2008 financial crisis.

"Neither JPMorgan Chase Bank, N.A. nor any other JPMorgan Defendant or Future JPMorgan Party shall seek indemnification, contribution, or recovery of any of the amounts paid pursuant to this Agreement from the FDIC in its corporate capacity," the settlement states.

Acting FHFA director Edward Demarco still sees the agreements, announced Friday, as "a satisfactory resolution," that 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."

JPMorgan will pay approximately $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae to resolve claims tied to mortgage securities the bank and its acquired subsidiaries, Bear Stearns and Washington Mutual, sold to housing finance authorities between 2005 and 2007.

Overall, JPMorgan will resolve $33.8 billion of securities purchased by Fannie Mae and Freddie Mac, the firm's largest MBS case, according to a Friday statement.

The bank will also pay $670 million to Fannie Mae and $480 million to Freddie Mac to resolve representation and warranty claims related to single-family mortgages purchased by the two companies.

In total, JPMorgan will pay $5.1 billion in its settlement and crucially, the firm will not be forced to admit wrongdoing in the settlement. "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.

Friday's settlement means it will be incumbent upon the Department of Justice to get JPMorgan to admit guilt or wrongdoing for mortgages the bank originated during the prior to the financial crisis.

A source familiar with the situation said that the FDIC's settlement was part of a broader settlement that included the DoJ, however, the FHFA got tired of waiting and wanted to move forward. A settlement with the DoJ is expected to be announced in coming days, however, terms are still being negotiated.

Earlier in October, JPMorgan reported a third-quarter loss of $400 million, or 17 cents a share, on revenue of $23.9 billion.

That loss was the first under CEO Jamie Dimon and was attributable to $9.15 billion in pretax expense and $7.2 billion in after-tax expense related to a rising provision for the bank's legal expense. 

The bank said in a presentation appended to its third-quarter earnings that since 2010 it has added $28 billion to its legal reserves, offset by an $8 billion reduction attributable to settlements and legal judgments.

The company had $23 billion in litigation reserves as of Sept. 30. 

-- Written by Antoine Gara in New York.

Follow @antoinegara

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs