At the end of October, a news release from the Federal Housing Finance Agency (FHFA) announced that it reached a $5.1 billion settlement with J.P. Morgan Chase & Co. According to the FHFA, which administers Fannie Mae and Freddie Mac, alleged that JPMorgan violated “federal and state securities laws in connection with private-label, residential mortgage-backed securities” that Fannie and Freddie purchased. What does this mean, exactly? In short, it means that JPMorgan “packaged bad loans and then sold residential mortgage-backed securities that later went south,” according to an article in the Chicago Tribune.
In recent months, big banks have been settling a significant number of claims related to mortgage fraud that led up to the housing market crash. But are these settlements doing anything consumers when they being paid out to Fannie and Freddie? If you have questions about mortgage fraud, settlement checks, and your rights as a consumer, don’t hesitate to contact an experienced real estate attorney. At the Emerson Law Firm, we have years of experience handling real estate matters and foreclosure defense cases, and we can speak to you today about your claim.
Details of the Latest FHFA Settlement
As per the terms of the settlement agreement, the $5.1 billion in funds is intended to resolve claims connected to JPMorgan and its purchase of “two troubled banks,” Bears Stearns and Washington Mutual, during the height of the housing crisis. After acquiring the smaller banks, JPMorgan is alleged to have committed securities fraud in connection to private-label mortgage-backed securities (PLS).
What is a private-label mortgage-backed security? According to the U.S. Securities and Exchange Commission, mortgage-backed securities are “debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property.” For example, banks and mortgages companies purchases a mortgages, and they’re “assembled into pools” by some kind of entity (governmental, quasi-governmental, or private). That entity will then issue securities, which “represent claims on the principal and interest payments made by borrowers on the loans in the pool.” This process is called “securitization.” When a private institution—for example, a bank like JPMorgan—securitizes mortgages, then you’re dealing with private-label mortgage-backed securities (PLS).
As the federal government continues to deal with issues related to the housing crisis, it will need to address fraudulent allegations like those against JPMorgan in its PLS dealings. According to Edward DeMarco, the acting director of the FHFA, the settlement represents “a significant step as the government and J.P. Morgan Chase move to address outstanding mortgage-related issues.” In the FHFA press release, he also emphasized, “I am pleased that a resolution of single family, whole loan representation and warranty claims could be achieved at the same time.” This settlement, DeMarco said, “will have a beneficial impact for taxpayers and the housing finance market.”
Of the settlement funds, $2.74 billion will go to Freddie Mac and $1.26 billion will go to Fannie Mae. Commentators also predict that this settlement is part of a larger settlement plan between the federal government and JPMorgan.
Illinois Foreclosure Defense Lawyers Can Help
Have you been the victim of mortgage fraud? Do you have questions about your eligibility for mortgage settlement funds? Many homeowners continue to face a number of difficulties with mortgage servicers and the housing market in general. Contact a dedicated foreclosure defense lawyer at the Emerson Law Firm today.
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