FT - BofA, JPMorgan, RBS could be on the hook for $4bn each

Money On Hook

Bank of America, JPMorgan Chase and Royal Bank of Scotland are being pressed for multibillion-dollar payments to the US government over toxic mortgage-backed securities, according to people familiar with negotiations.

The Financial Times reports that The Federal Housing Finance Agency, the US housing regulator, sued 18 international financial groups in 2011, alleging they broke federal securities laws in selling $200bn of mortgage-backed securities and demanding compensation for billions of dollars of losses.

On Thursday the FHFA made the UBS settlement amount public – a $885m payout -  and it represents the first marker for how large other settlements could be and it is a much larger recovery than in other mortgage deals stemming from the crisis.

UBS was a relatively small seller of MBS to Fannie Mae and Freddie Mac, the government-backed mortgage companies, with $6.4bn notional value. BofA, JPMorgan and RBS were much bigger, each with more than $30bn in notional value.

If they settled in the same proportion, they would pay more than $4bn each to the FHFA.

Hit the link below to access the complete Financial Times article:

US presses banks for multibillion payments over mortgage securities (subscriber content)

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Tourre regrets ‘widows and orphans’ joke (subscriber content)

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