This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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!

JPMorgan Settles With FHFA, Does Not Admit Wrongdoing

Stocks in this article: JPM FNMA FMCC

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

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

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