FHFA Said to Seek $6 Billion Minimum in JPMorgan Talks

A U.S. housing regulator is seeking at least $6 billion from JPMorgan Chase & Co. to settle civil claims the bank sold bad mortgage bonds to government-backed finance companies Fannie Mae and Freddie Mac, according to a person briefed on the matter.

JPMorgan, the biggest U.S. bank by assets, is fighting the Federal Housing Finance Agency’s latest request, said the person, who asked not to be identified because the talks are private. The lawsuit is scheduled to go to trial in June, according to a filing in federal court in Manhattan.

The FHFA sued JPMorgan and 17 other banks over faulty mortgage bonds two years ago in an effort to recoup some of the losses taxpayers were forced to cover when the government took over the failing mortgage finance companies in 2008. Fannie Mae and Freddie Mac, which are regulated by FHFA, have taken $187.5 billion in federal aid since then.

Peter Garuccio, a spokesman for FHFA, and Justin Perras, a spokesman for the bank, declined to comment. The Financial Times reported the $6 billion minimum settlement request earlier today.

False Statements

The FHFA accused JPMorgan and its affiliates of making false statements and omitting material facts in selling $33 billion in mortgage bonds to Fannie Mae and Freddie Mac from Sept. 7, 2005 through Sept. 19, 2007. The regulator said executives at JPMorgan, Washington Mutual and Bear Stearns Cos., which were acquired by JPMorgan in 2008, knowingly misrepresented the quality of the loans underlying the bonds, among other things, according to the lawsuit.

UBS AG, Switzerland’s largest bank, agreed to pay $885 million last month to settle claims it misrepresented the quality of the loans backing $4.5 billion in residential mortgage bonds sponsored by UBS and $1.8 billion of third-party mortgage bonds sold to Fannie Mae and Freddie Mac.

UBS was the third bank to reach an agreement with FHFA. Citigroup Inc. and General Electric Co. both paid undisclosed amounts to settle the regulator’s claims.

Before it's here, it's on the Bloomberg Terminal.