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Fannie Mae Regulator Claims $8 Billion in Mortgage Bond Accords

Fannie Mae Headquarters
The Fannie Mae headquarters stands in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Jan. 2 (Bloomberg) -- Seven banks, including JPMorgan Chase & Co. and Deutsche Bank AG, agreed to pay a total of nearly $8 billion last year to settle claims that they sold faulty mortgage bonds to Fannie Mae and Freddie Mac, the Federal Housing Finance Agency said.

The FHFA sued 18 banks in 2011 seeking to recoup some of the losses taxpayers covered when the government took control of the failing mortgage-finance companies in 2008. The agency accused the banks of violating securities laws and, in some cases, committing fraud when they sold private-label mortgage bonds backed by improperly originated loans.

The largest settlements last year were with New York-based JPMorgan, which agreed to pay $4 billion, and Frankfurt-based Deutsche Bank, which reached a $1.9 billion settlement. Other banks settling included Citigroup Inc., UBS AG and Ally Financial Inc.. Wells Fargo & Co., which wasn’t among those sued, agreed to pay $335 million.

FHFA claims against 12 companies, including Goldman Sachs Group Inc. and Bank of America Corp., are still in litigation.

Fannie Mae and Freddie Mac have taken $187.5 billion in U.S. aid and have returned $185.2 billion under terms of their federal conservatorship. The companies are required to turn over to the Treasury all quarterly profits above a $3 billion net worth-cap, and money is counted as a return on the nearly 80 percent stakes the goverment holds, not as repayment of aid.

To contact the reporter on this story: Clea Benson in Washington at cbenson20@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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