JPMorgan to pay $500 million in Bear Stearns mortgage settlement: source

Fri Jan 9, 2015 11:41am EST
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By Jonathan Stempel

NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) has agreed in principle to settle class action litigation arising from Bear Stearns' sale of $17.58 billion of mortgage securities that proved defective during the recent U.S. housing and financial crises.

The largest U.S. bank, which bought Bear in 2008, will pay roughly $500 million to investors led by a group of pension funds, a person familiar with the matter said on Friday. The person requested anonymity because the terms have not been made public.

JPMorgan declined to comment. A lawyer for the investors did not immediately respond to requests for comment.

The accord, which requires court approval, was disclosed in a Thursday night filing with the U.S. District Court in Manhattan.

It is separate from JPMorgan's $13 billion settlement with regulators in November 2013 over mortgage securities sales.

The latest accord resolves claims that Bear violated federal securities laws by selling certificates backed by more than 47,000 largely subprime and low documentation "Alt-A" mortgages in 14 offerings from May 2006 to April 2007.

Investors said the offering documents contained false and misleading statements about the underwriting guidelines used by Bear's EMC Mortgage unit, Countrywide Home Loans and other lenders, and the accuracy of associated property appraisals.

Bear was not accused of fraud, but investors sought to hold it strictly liable and negligent for their losses.   Continued...

A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar