US seeking $6 billion from JPMorgan to settle mortgage claims: Source
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US seeking $6 billion from JPMorgan to settle mortgage claims: Source

Last Updated: Wednesday, August 28, 2013, 10:28
 
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US seeking $6 billion from JPMorgan to settle mortgage claims: Source
New York: US government housing finance authorities are pressing JPMorgan Chase & Co for at least USD 6 billion to settle lawsuits over bonds backed by subprime mortgages, according to a person familiar with the matter.

The company is arguing that it should pay less to settle the claims by the U.S. Federal Housing Finance Agency, according to the source, who was not authorized to speak for attribution.

The FHFA litigation is among a raft of legal issues JPMorgan is trying to work through in addition to investigations over its USD6.2 billion "London Whale" derivatives loss of last year.

An FHFA spokeswoman declined to comment.

The FHFA, which oversees Fannie Mae and Freddie Mac, sued JPMorgan over some USD33 billion of securities two years ago and also sued at least 16 other financial institutions.

The lawsuits alleged that the banks misrepresented how well they had checked the underlying mortgages and charged that they did not meet investors' criteria. As borrowers fell behind in payments, the value of the securities fell, causing losses.

The securities at issue in the talks with JPMorgan include bonds that were sold by Washington Mutual and Bear Stearns, two troubled institutions that JPMorgan took over with government encouragement during the financial crisis.

Some banks have already settled mortgage litigation with government officials who are trying to make the banks bear more of the cost of the housing crisis. Switzerland-based UBS settled with the FHFA for USD885 million in July. [ID:nL1N0FV2AR] Citigroup Inc and General Electric Co have also reached settlements.

Fannie Mae and Freddie Mac, entities sponsored by the U.S. government, were seized by the government in 2008 and received USD187.5 billion to stay afloat.

The Financial Times reported the amount being sought from JPMorgan over the mortgage securities on its website earlier on Tuesday.

JPMorgan has spent about USD5 billion for legal costs in each of the past two years. The company raised its estimate of possible losses in excess of its reserves to USD6.8 billion at the end of June from USD6 billion three months earlier.

Reuters



First Published: Wednesday, August 28, 2013, 10:28


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