Morgan Stanley and JPMorgan agreed to pay $1.86bn to end U.S. accusations of misconduct in their handling of home loans and related securities that left taxpayers shouldering losses after the financial crisis.
Bloomberg reports that Morgan Stanley said yesterday it reached a $1.25bn deal to end Federal Housing Finance Agency claims the bank sold faulty mortgage bonds to Fannie Mae and Freddie Mac before the firms’ losses pushed them into U.S. conservatorship. JPMorgan will pay $614m after admitting it submitted ineligible loans for Federal Housing Administration and Veterans Affairs insurance.
JPMorgan 'put profits ahead of responsibility by recklessly churning out thousands of defective mortgage loans, failing to inform the government of known problems with those loans and leaving the government to cover the losses,' Manhattan U.S. Attorney Preet Bharara said in a statement.
The six largest U.S. lenders have allocated more than $114bn since the financial crisis to cover legal expenses, government probes and mortgage-related claims. Morgan Stanley’s deal with the FHFA prompted the bank to book an additional $150m charge in the fourth quarter, reducing earnings for the period by 5 cents a share.
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