Correction: Fannie-Freddie Mortgages stories

Published on NewsOK Modified: March 27, 2014 at 6:19 pm •  Published: March 27, 2014
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WASHINGTON (AP) — In three stories last fall about regulators' settlements with JPMorgan Chase and Wells Fargo & Co., The Associated Press reported erroneously that the Federal Housing Finance Agency sued 18 financial institutions in September 2011 over sales of mortgage securities to Fannie Mae and Freddie Mac that later soured.

The FHFA sued UBS in July 2011 and 17 other banks in September.

Corrected versions of the stories are below:

JPMorgan paying $5.1B in Fannie, Freddie deal

JPMorgan paying $5.1B to resolve US claims over mortgage securities sold to Fannie, Freddie

By MARCY GORDON

AP Business Writer

WASHINGTON (AP) — JPMorgan Chase has agreed to pay $5.1 billion to resolve claims that it misled Fannie Mae and Freddie Mac about risky home loans and mortgage securities it sold them before the housing market collapsed.

The Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the settlement Friday with JPMorgan, the largest U.S. bank. A broader deal with the Justice Department is still being negotiated.

JPMorgan sold around $33 billion in mortgage securities to Fannie and Freddie between 2005 and 2007, according to the agency. That was the second-most sold to Fannie and Freddie ahead of the crisis, behind only Bank of America Corp. The securities soured after the housing bubble burst in 2007, losing billions in value.

Fannie and Freddie were rescued in a taxpayer bailout in 2008 as they sank under the weight of mortgage losses.

In a statement Friday, JPMorgan called the agreement with the FHFA "an important step towards a broader resolution of the firm's" mortgage-related matters.

Edward DeMarco, the FHFA's acting director, said the settlement with JPMorgan "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."

The deal is expected to be followed by a broader agreement with the Justice Department and New York state authorities that's still being negotiated. Last weekend, JPMorgan reached a tentative agreement with Justice to pay $13 billion over bad loans and mortgage securities the bank sold before the crisis.

The $13 billion tentative deal included $4 billion to resolve the FHFA claims. Even reduced by that amount, it would be the largest penalty the government has extracted from a company for actions related to the financial crisis. It's unclear when the broader agreement will be finalized.

New York Attorney General Eric Schneiderman applauded the FHFA's settlement. "Five years after the financial crisis, it is critical that we continue to share resources to maximize the relief provided to struggling homeowners and ensure accountability for those who created the crisis in the first place," he said in a statement.

The crisis, triggered by vast sales of risky mortgage securities, plunged the economy into the deepest recession since the Great Depression.

The FHFA sued 18 financial institutions in 2011 over their sales of mortgage securities to Fannie and Freddie. The total price for the securities sold was $196 billion.

The government rescued Fannie and Freddie during the financial crisis when both were on the verge of collapse. The companies received taxpayer aid totaling $187 billion. They have since become profitable and repaid $146 billion.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages. The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available and gives Fannie and Freddie a huge role in the housing market.

New York-based JPMorgan will pay about $2.74 billion to Freddie and $1.26 billion to Fannie for the securities it sold. JPMorgan is also paying $1.1 billion for home loans it sold to Fannie and Freddie ahead of the crisis. Under the terms of the settlement, JPMorgan admits no wrongdoing.