This Day On The Street
Continue to site
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

JPMorgan Settles With FHFA, Does Not Admit Wrongdoing

NEW YORK ( TheStreet) -- The Federal Housing Finance Agency (FHFA) late on Friday announced $5.1 billion in settlements of claims against JPMorgan Chase (JPM - Get Report), which investors will likely cheer, since the bank didn't admit any wrongdoing.

The FHFA regulates Fannie Mae (FNMA) and Freddie Mac (FMCC), known as the government-sponsored enterprises, or GSEs, which were taken under government conservatorship at the height of the credit crisis in 2008.

The FHFA sued JPMorgan and its main banking subsidiary over losses on private label mortgage-backed securities sold to the GSEs.

Under a $4 billion settlement, JPMorgan on Friday agreed to pay $1.26 billion to Fannie Mae and $2.74 billion to Freddie Mac, "to resolve certain claims related to securities sold to the companies between 2005 and 2007 by J.P. Morgan Chase & Co., Bear Stearns & Co., Inc. and Washington Mutual." The securities in question totaled $33.8 billion, according to a brief statement released by JPMorgan Chase.

JPMorgan acquired Bear Stearns in March 2008, after the investment bank went through a liquidity crisis that threatened to lead to bankruptcy. JPMorgan purchased the failed Washington Mutual from the Federal Deposit Insurance Corp., after the nation's largest savings and loan institution was shut down by regulators in September 2008.

Under separate settlement agreements announced by the FHFA on Friday, JP Morgan Chase Bank, NA will pay roughly $670 million to Fannie Mae and $480 million to Freddie Mac.

The total tab on Friday of $5.1 billion is only part of the expected wave of settlements JPMorgan is expected to enter into, to resolve investigations of its mortgage lending and sales activity by the Department of Justice, other regulators and states' attorneys general.

Friday's settlements exceed the $4 billion that was widely reported in the media over the past week, however, the language of the settlement agreements is favorable to JPMorgan.

There has been a change in thinking among the Department of Justice and federal regulators, leading to an expectation that financial firms settling government investigations shouldn't be able to avoid admitting fault.

Friday's settlements are completely different from previous settlements JPMorgan has made with Fannie and Freddie, because they cover losses on private label mortgage-backed securities, rather than losses on mortgage loans made under GSE guidelines. The GSEs bought the same MBS that other institutional investors bought from JPMorgan.

Therefore, and admission of wrongdoing would have made it very easy for other institutional investors to make strong cases against JPMorgan, without having to comb through loan-level data.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FMCC $1.55 0.00%
FNMA $1.70 0.00%
JPM $63.20 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs