By RTT News, October 25, 2013, 06:34:00 PM EDT
(RTTNews.com) - JPMorgan Chase & Co. ( JPM ) Friday agreed to pay $5.1 billion to settle claims over the sale of faulty mortgage-backed securities to Fannie Mae and Freddie Mac ahead of the housing bubble. The announcement was made by the Federal Housing Finance Agency which regulates the mortgage guarantors.
Much of the settlement relates to billions of dollars of securities purchased by Fannie Mae and Freddie Mac from J.P. Morgan, Bear Stearns and Washington Mutual.
JPMorgan said it will pay $4 billion to settle claims of securities-law violations over residential mortgage-backed securities bought by Fannie Mae and Freddie Mac -- about $2.74 billion to Freddie Mac and $1.26 billion to Fannie Mae.
Another settlement of $1.1 billion pertains to repurchase claims over some loans by the two companies, of which JPMorgan will pay $670 million to Fannie Mae and $480 million to Freddie Mac.
The settlement resolves JPMorgan's largest securities case and is part of a larger agreement with the Justice Department. JPMorgan and the Justice Department are said to have discussed settlements totaling $13 billion.
Apart from today's settlement with FHFA, the deal with the Justice Department possibly includes $4 billion in consumer relief, about $3 billion for investors who incurred losses from the purchase of bank-issued securities and $2 billion in penalties. If completed, this would represent the largest settlement the U.S. has reached with a single company.
Attorney General Eric Holder and JPMorgan Chief Executive Jamie Dimon were among those to finalize the broad terms of the deal.
In August, JPMorgan disclosed the possibility of facing criminal and civil probes related to soured mortgage loans sold by the company prior to the financial crisis. The loans tumbled in value along with housing prices in 2007 and 2008 and created a havoc in the financial system.
JPMorgan has incurred a whopping $18 billion in legal expenses since 2008.
Earlier this week, JPMorgan agreed to pay $100 million to settle charges leveled by the Commodity Futures Trading Commission related its handling of the so-called 'London Whale' trading loss.
In September, JPMorgan agreed to pay about $920 million in penalties to US and UK regulators for the derivative losses suffered in the 'London Whale' trading.
JPMorgan stock closed Friday at $52.77, up $0.29 or 0.55%, on a volume of 19.3 million shares on the NYSE. In after hours, the stock gained $0.07 or 0.13% at $52.84. In the past year, the stock traded in the range of $38.83 - $56.93.
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