A settlement reached between JPMorgan Chase & Co.’s banking unit and the Federal Deposit Insurance Corp. will cover more than $600 million in litigation costs paid by the bank.
During the depths of the financial crisis in September 2008,
Washington Mutual Bank was seized by the Office of Thrift Supervision — becoming the biggest bank failure in U.S. history.
The now-defunct OTS
appointed the Federal Deposit Insurance Corp. as receiver, and the FDIC negotiated a deal for JP Morgan Chase Bank, N.A., to take over Seattle-based WaMu.
But since the WaMu acquisition, Chase has been plagued with litigation over alleged
breaches of representations and warranties given by WaMu affiliates in connection with mortgage securitization agreements.
Among the plaintiffs that sued both the FDIC and Chase was Deutsche Bank National Trust Co. in its capacity as trustee of 99 residential mortgage-backed securitization trusts issued or sponsored by WaMu and its affiliates.
Deutsche filed its lawsuit in U.S. District Court for the District of Columbia.
That action is
currently on appeal to the U.S. Court of Appeals for the D.C. Circuit.
In turn, Chase made indemnification claims against the FDIC over liabilities it says it didn’t assume in the purchase-and-assumption agreement for WaMu with the federal regulator.
In a Form 8-K filing Friday with the Securities and Exchange Commission, Chase indicated that a definitive agreement resolving the outstanding disputes with the FDIC was executed.
Chase said the agreement follows a previously disclosed term sheet it signed with Deutsche and the FDIC.
The agreement clarifies
which WaMu liabilities Chase did and did not assume in connection with the WaMu acquisition and resolves all disputes among Deutsche, the FDIC and Chase concerning the mortgage repurchase and other liabilities.
The settlement has Chase being paid $645 million from the WaMu receivership estate.
In return, the New York-based company will
release all of its indemnity and other claims against the estate, including substantially more than $1 billion in claims tied to the WaMu transaction.
In addition, the FDIC receiver will provide Deutsche an allowed claim in the receivership estate.
“The settlement, which remains subject to certain judicial approval procedures, will result in the dismissal of the four [Washington Mutual Bank]-related actions pending in the U.S. District Court for the District of Columbia to which the firm and the FDIC are parties and in pre-tax income to the firm in the amount of the cash payment in the future period in which it is recognized,” the filing stated.
