JPMorgan Chase has secured important concessions in a $13 billion settlement over its mortgage practices, allowances that could ultimately reduce the bank’s financial burden and leave the government itself on the hook for a small portion of the cost.
The concessions emerged Friday in an agreement with one of the federal regulators suing JPMorgan, the nation’s largest bank. The regulator, the Federal Housing Finance Agency, ran ahead of a broader deal that the Justice Department and other authorities were negotiating with the bank.
The housing agency, which oversees Fannie Mae and Freddie Mac, extracted a $5.1 billion payout Friday.
But unlike other regulators pursuing the bank, it did not require JPMorgan to admit wrongdoing. And in a provision buried in the settlement, the agency effectively allows JPMorgan to try later to recoup about $1 billion from another federal regulator: the Federal Deposit Insurance Corp.
The results show that, even as JPMorgan is facing an onslaught from the government, the bank is seeking to contain the fallout — and is succeeding on some fronts.
In a statement, JPMorgan called the deal “an important step towards a broader resolution” with the Justice Department and the other government authorities.
For its part, the housing agency, while not responding to questions about the wording of the agreement, also heralded the settlement. “This is a significant step as the government and JPMorgan Chase move to address outstanding mortgage-related issues,” Edward DeMarco, the acting director of the housing agency, said in a statement.
Yet the housing agency’s announcement also suggests that the government may be split over how to punish the bank for misrepresenting the quality of mortgage securities it sold to investors before the 2008 financial crisis. The Justice Department, which has orchestrated the $13 billion settlement, is conversely demanding that JPMorgan not pass on its liabilities to the FDIC.
JPMorgan has been locked in a legal battle with the FDIC over mortgage securities sold by Washington Mutual. In a deal that the FDIC orchestrated, JPMorgan bought the failed bank at the height of the financial crisis in 2008. By JPMorgan’s account, the FDIC agreed that it would shoulder some liabilities from Washington Mutual. The agency disputes that notion and is fighting the bank in court.