Exclusive: U.S. steps up probe of JPMorgan over Bear mortgage bonds

Thu Aug 8, 2013 3:47pm EDT
 
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By Emily Flitter, Karen Freifeld and David Henry

(Reuters) - The U.S. Department of Justice has stepped up a probe in recent weeks into Bear Stearns & Co's mortgage dealings in the run-up to the financial crisis, according to two sources familiar with the situation, raising the possibility that JPMorgan Chase & Co may face yet another case over mortgage bonds.

Justice Department lawyers in Washington have been interviewing people linked to Bear Stearns' mortgage securitization business, EMC Mortgage Corp, over sales of mortgage bonds going into the housing crisis, the sources said.

JPMorgan bought Bear Stearns during the financial crisis in 2008.

The probe, which Reuters first reported in February, has picked up steam in recent weeks and comes in addition to civil and criminal investigations of the bank by U.S. prosecutors in California over its offerings of mortgage bonds.

A spokeswoman for the Justice Department declined to comment. A JPMorgan spokesman declined to comment.

On Wednesday, JPMorgan disclosed the California-based investigations by the Justice Department and said the civil division has concluded that the company violated federal securities laws in offerings of subprime and Alt-A residential mortgage securities during 2005 to 2007.

Those investigations, which are being run by the U.S. Attorney for the Eastern District of California, involve mortgage securities offered by JPMorgan itself, a source familiar with the matter said earlier on Thursday.

JPMorgan is already being sued in nine cases by mortgage insurers that had guaranteed parts of 19 different EMC Mortgage offerings, according to company disclosures.   Continued...

 
Two men walk past the front desk inside of the headquarters of JPMorgan Chase & Co bank in New York, March 15, 2013. REUTERS/Lucas Jackson