JPMorgan in $4 billion deal with U.S. housing agency

Reuters

By Aruna Viswanatha and David Henry

WASHINGTON/NEW YORK, Oct 18 (Reuters) - JPMorgan Chase & Co has reached a tentative $4 billion deal with the U.S.Federal Housing Finance Agency to settle claims that the bankmisled government-sponsored mortgage agencies about the qualityof mortgages it sold them during the housing boom, according toa person familiar with the matter.

JPMorgan and the FHFA, which is pursuing claims on behalf offinance agencies Fannie Mae and Freddie Mac, have agreed on theamount as a tentative part of a potential $11 billion globalsettlement with government agencies, including the U.S.Department of Justice.

The $4 billion figure was first reported on Friday by theWall Street Journal.

A spokesman for JPMorgan declined to comment as did aspokeswoman for the FHFA.

The bank and the Department of Justice have discussed abroader deal under which JPMorgan would pay $7 billion of cashand $4 billion of consumer relief, to cover claims from the FHFAand other government agencies.

JPMorgan is seeking a single settlement to resolve allclaims from federal and state agencies over its mortgage-relatedliabilities stemming from the bust in house prices.

Baring a complete breakdown in talks with the Department ofJustice, a final deal between the bank and the FHFA is unlikelyto happen outside of a broader pact, a person familiar with thematter told Reuters on Friday.

Earlier this week, others familiar with the talks saidnegotiations continued between the Justice Department andJPMorgan, 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 onthe dollar, less than the 20-cent rate under an earliersettlement by Switzerland-based bank UBS AG, said JoshRosner, managing director of Graham Fisher & Co, a New Yorkresearch consultancy.

At first glance, the tentative settlement looks like "agreat deal for JPMorgan," Rosner said. He cautioned that it isunclear how comparable the deals are because the loans at issuehave different origins and differences between the balances owedare not known.

CEO Jamie Dimon went to Washington to meet with U.S.Attorney General Eric Holder on Sept. 26 to advance thosediscussions, but a deal has not been forthcoming.

Though Dimon is intent on getting the legal issues behindthe bank, a sore spot with him and other JPMorgan directors hasbeen how much the company will have to pay for bad mortgagedeals done by Washington Mutual and Bear Stearns, two troubledinstitutions that JPMorgan took over during the financial crisiswith the encouragement from bank regulators.

JPMorgan reported its first quarterly loss under Dimon onFriday as the company recorded a $7.2 billion hit fromlitigation expenses largely to build its reserves to settlelawsuits over mortgages. The bank said all of its legal reservesnow amount to $23 billion.

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