Yet another settlement. (Photo by Spencer Platt/Getty Images)
Yet another settlement. (Photo by Spencer Platt/Getty Images)

Earlier this week, we brought you an explainer of what you need to know about a $13 billion settlement in the works between JPMorgan Chase and the Justice Department over practices of the bank (and companies it later acquired) that packaged shaky mortgages into securities and put them on the books of Fannie Mae and Freddie Mac.

Late Friday, the regulator of Fannie and Freddie ruined the weekends of many a banking reporter by announcing it has a $5.1 billion settlement of its own with JPMorgan. What the heck is going on here?

First, there is significant overlap between the two settlements. Some $4 billion out of the $5.1 billion settlement with the Federal Housing Finance Agency is to address the same claims that are to be included in the $13 billion overall settlement with the government, which is still said to be in final negotiations.

The biggest chunk of the new FHFA settlement--the part that overlaps with the Justice Department deal--is for mortgage-backed securities that JPMorgan, Washington Mutual, and Bear Stearns sold to Fannie and Freddie in the pre-crisis days (WaMu and Bear were bought by JPMorgan in 2008, and the latter bank assumed their liabilities).

The other $1.1 billion of the settlement is for loans that the three companies sold directly to Fannie and Freddie, many of which subsequently turned out to be no good.

The news suggests two things. First, there appears to be some tension among the various government agencies involved. It is surprising to see FHFA announce its portion of the master settlement before the full deal is ready to be rolled out. It is all the more surprising given that Attorney General Eric Holder has been personally involved in negotiating the arrangement for the Justice Department.

The second lesson is a reminder of just how sprawling and open-ended the legal exposure of the major banks remains for loans that were made six or more years ago and which only triggered a global financial crisis five years ago. The fact that $1.1 billion--an amount that would render a smaller bank insolvent--is the "new" part of JPMorgan's settlements with the government is a reminder that these challenges for the big banks aren't going away anytime soon, and will have a gargantuan tab before it's all over with.

For more on JPMorgan and its settlement, read here.