JPMorgan to pay $500 million in mortgage settlement

Tue Feb 3, 2015 10:17am EST
 
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By Jonathan Stempel

NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote) has agreed to pay $500 million to end more than six years of class action litigation over Bear Stearns' sale of $17.58 billion of mortgage securities that proved defective during the U.S. housing and financial crises.

The all-cash settlement was made public late Monday, and requires approval by U.S. District Judge Laura Taylor Swain in Manhattan.

It resolves claims that Bear, which JPMorgan bought in 2008, misled investors when it sold certificates backed by more than 47,000 largely subprime and low documentation "Alt-A" mortgages in 14 offerings from May 2006 to April 2007.

Bear was accused of making false and misleading statements in offering documents about underwriting guidelines used by its EMC Mortgage unit, Countrywide Home Loans, Wells Fargo and other lenders, and the accuracy of associated property appraisals.

While Bear was not accused of fraud, investors sought to hold it strictly liable and negligent for their losses. They said that while most of the certificates were once rated "triple-A," at least $16.96 billion fell to "junk" status.

JPMorgan denied wrongdoing in agreeing to settle. The largest U.S. bank will pay an additional $5 million to cover administration costs.

A JPMorgan spokesman declined to comment.

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

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