JPMorgan Chase & Co. (JPM)’s tentative $13 billion settlement will include about $3 billion for states and federal regulators, much of which may be passed on to investors who bought faulty mortgage-backed securities, according to two people briefed on the matter.
The settlement will also cover a $2 billion penalty against the bank, $4 billion for the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, and about $4 billion to help homeowners in hard-hit metropolitan areas, according to the people, who asked not to be identified because the accord hasn’t been finalized and negotiations aren’t public.
Chief Executive Officer Jamie Dimon, 57, is seeking to settle multiple civil claims that the company misrepresented the quality of mortgage-bonds that were packaged and sold at the height of the U.S. housing boom by JPMorgan as well as by Bear Stearns Cos. and Washington Mutual Inc., both of which were acquired by the New York-based bank in 2008.
While the settlement will help compensate investors who bought securities from all three entities, the bank won’t pay fines for misdeeds committed by Bear Stearns and Washington Mutual, the people said. The accord wouldn’t release JPMorgan or its executives from possible criminal liability, a person familiar with the settlement’s terms said on Oct. 19.
JPMorgan, the biggest U.S. bank by assets, is still working out final details of the record settlement with the U.S. Department of Justice, including a statement of facts, the people said. Joe Evangelisti, a spokesman for JPMorgan in New York, didn’t reply to calls and e-mails seeking comment. Adora Andy Jenkins, a spokeswoman for the Justice Department, declined to comment.
Some pieces might not be concluded by the time a deal is announced, they said. Both sides are still working out the details of how to disburse the relief to homeowners and investors, the people said.
The $3 billion portion will be split between California Attorney General Kamala Harris, New York Attorney General Eric Schneiderman, the Federal Deposit Insurance Corp., National Credit Union Administration and possibly another state, the people said. New York state will receive about $500 million and will probably use it to reimburse investors, they said.
The Wall Street Journal and New York Times reported the breakdown of the settlement earlier today.