NEW YORK: JPMorgan Chase said on Friday that it had reached a deal with 21 institutional investors to pay $4.5bn for losses on mortgage securities it and Bear Stearns sold before the financial crisis.
JPMorgan said the deal would settle investors’ claims that the bank and Bear Stearns, which it took over at the outset of the crisis, had misrepresented the asset quality of 330 residential mortgage-backed securities the investors were sold.
The bank said the settlement is “another important step in JPMorgan’s efforts to resolve legacy-related RMBS matters.” “The firm believes it is appropriately reserved for this and any remaining RMBS litigation matters.” The deal follows JPMorgan’s agreement to pay $5.1bn to government-controlled mortgage giants Fannie Mae and Freddie Mac over low-quality mortgage bonds it sold them.
And it also comes after the institutional investors struck a deal for Bank of America to pay $8.5 billion for questionable RMBS it and subsidiary Countrywide sold with exaggerated quality ratings. But like the Bank of America deal, the new JPMorgan agreement still needs to be approved by trustees of the mortgage securities in the case, as well as a court.
The trustees have until January 15 to accept the deal, but the offer could be extended by another 60 days if necessary. In a statement the 21 investors said they agree to the deal and are asking the trustees of the bond issues to accept it. AFP
