JPMorgan Reaches Settlement Agreement With Investors Over Faulty MBS

Posted by Patrick Barnard on August 04, 2014 No Comments
Categories : Required Reading

A group of 21 institutional investors, including BlackRock Inc., Pacific Investment Management Co., U.S. Bank and Bank of New York Mellon Corp., have reportedly given a New York state court judge the green light to move forward with a $4.5 billion settlement with JPMorgan Chase to resolve claims that the bank sold faulty mortgage-backed securities (MBS) to investment trusts during the run-up to the 2008 financial crisis.

As per a Bloomberg News report, JPMorgan had been negotiating the settlement for more than 10 months and had requested an extension on the decision deadline several times. The bank made a tentative offer of $4.5 billion to the trustees back in November – however, it took months to get a majority of the investors to agree to a final settlement figure.

In fact, there still isn't full agreement: According to the report, five of the 330 trusts involved in the suit have rejected the current proposed accord, which could leave the bank exposed to a larger payout.

The suit included claims of faulty underwriting procedures, as well as claims over loan servicing and document delivery, according to the report. Bear Stearns, which JPMorgan took over during the financial crisis, originated a majority of the loans.

Last fall, JPMorgan agreed to a $13 billion settlement with government agencies over faulty MBS – the largest settlement paid by a bank to the government in U.S. history.

For more, check out the Bloomberg News report.

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