JPMorgan Chase has reached a $5.1 billion settlement with federal housing regulators over loans and mortgage-backed securities it sold to Fannie Mae and Freddie Mac.
Under the terms of the deal with the Federal Housing Finance Agency (FHFA) announced on Friday evening, the bank will pay billions to the housing giants over false statements it made during the housing bubble.
The deal “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,” FHFA acting Director Edward DeMarco said in a statement.
The $5.1 billion figure is the sum of two separate settlements that the bank reached with regulators.
One required the bank pay a total of $4 billion over securities it sold as well as those from Bear Stearns and Washington Mutual, which JPMorgan acquired in 2007 and 2008. The other penalty is for $1.1 billion, and deals with single-family mortgages that the bank sold to Fannie Mae and Freddie Mac.
According to the housing regulator, bank officials knowingly misrepresented details about the loans.
“I am pleased that a resolution of single family, whole loan representation and warranty claims could be achieved at the same time,” DeMarco added. “This, too, will have a beneficial impact for taxpayers and the housing finance market.”
JPMorgan Chase is the largest bank in the country.
The law firm of Quinn Emanuel Urquhart and Sullivan led the case.
“After more than two years of hard-fought litigation in the federal district and appellate courts, this landmark $4 billion settlement with J.P. Morgan is a clear victory for the integrity of the financial markets and the American taxpayer,” the firm’s chairman of securities and structured finance, Philippe Selendy, said in a statement.
The deal is part of a reported $13 billion agreement with the federal government over mortgage-backed securities.
That larger deal would be the largest financial settlement the U.S. has ever reached with a single firm.