FHFA wants $6B from JPMorgan to settle MBS claims

|About: JPMorgan Chase & Co. (JPM)|By:, SA News Editor

UBS last month agreed to a precedent-setting $885M settlement, or more than 90% of expected losses on MBS it packaged. The notional value of paper sold by JPMorgan (JPM) is 5x larger than that of UBS, leading to a figure close to the $6B range. JPMorgan - negotiating for a lower amount - says claims against other banks allege fraud, making their offenses more serious.

$6B would be the high-end of what JPMorgan last year figured was its liability in the case (the suit is over $33B in MBS). The House of Dimon could await its day in court, but nearly all initial rulings have gone against the banks thus far. A settlement before the summer 2014 trial date still looks probable.

Watching closely will be Bank of America (BAC) and RBS, both of which have heavy exposure to the FHFA suits and have yet to settle. Morgan Stanley estimates a worst-case scenario of $3.6B for BofA vs. a base case of $2B.