By Aruna Viswanatha and David Henry
WASHINGTON/NEW YORK Oct 18 JPMorgan Chase & Co
has reached a tentative $4 billion deal with the U.S.
Federal Housing Finance Agency to settle claims that the bank
misled government-sponsored mortgage agencies about the quality
of mortgages it sold them during the housing boom, according to
a person familiar with the matter.
JPMorgan and the FHFA, which is pursuing claims on behalf of
finance agencies Fannie Mae and Freddie Mac, have agreed on the
amount as a tentative part of a potential $11 billion global
settlement with government agencies, including the U.S.
Department of Justice.
The $4 billion figure was first reported on Friday by the
Wall Street Journal.
A spokesman for JPMorgan declined to comment as did a
spokeswoman for the FHFA.
The bank and the Department of Justice have discussed a
broader deal under which JPMorgan would pay $7 billion of cash
and $4 billion of consumer relief, to cover claims from the FHFA
and other government agencies.
JPMorgan is seeking a single settlement to resolve all
claims from federal and state agencies over its mortgage-related
liabilities stemming from the bust in house prices.
Baring a complete breakdown in talks with the Department of
Justice, a final deal between the bank and the FHFA is unlikely
to happen outside of a broader pact, a person familiar with the
matter told Reuters on Friday.
Earlier this week, others familiar with the talks said
negotiations continued between the Justice Department and
JPMorgan, with the bank circulating several proposals.
The FHFA has sued JPMorgan over mortgage loans totaling some
$33 billion. A $4 billion deal would amount to about 12 cents on
the dollar, less than the 20-cent rate under an earlier
settlement by Switzerland-based bank UBS AG, said Josh
Rosner, managing director of Graham Fisher & Co, a New York
At first glance, the tentative settlement looks like "a
great deal for JPMorgan," Rosner said. He cautioned that it is
unclear how comparable the deals are because the loans at issue
have different origins and differences between the balances owed
are not known.
CEO Jamie Dimon went to Washington to meet with U.S.
Attorney General Eric Holder on Sept. 26 to advance those
discussions, but a deal has not been forthcoming.
Though Dimon is intent on getting the legal issues behind
the bank, a sore spot with him and other JPMorgan directors has
been how much the company will have to pay for bad mortgage
deals done by Washington Mutual and Bear Stearns, two troubled
institutions that JPMorgan took over during the financial crisis
with the encouragement from bank regulators.
JPMorgan reported its first quarterly loss under Dimon on
Friday as the company recorded a $7.2 billion hit from
litigation expenses largely to build its reserves to settle
lawsuits over mortgages. The bank said all of its legal reserves
now amount to $23 billion.