JPMorgan Chase & Co said it had agreed to settle claims from 21 institutional investors for USD 4.5 billion. The investors had alleged that the lender sold them faulty mortgage bonds. In a statement, JPMorgan said the agreement included 330 mortgage bond trusts which it issued from 2005 to 2008. The bank added that the deal would still need to be approved by the trustees that manage the securities. It may also be subjected to review by the court.
The 21 institutional investors in the settlement included the asset management units of BlackRock Inc, Goldman Sachs Group Inc and Pacific Investment Management Co. The investor group was represented by the law firm Gibbs & Bruns.
Under the terms of the deal, the settlement would be used to pay the repurchase demands and servicing claims on the bonds. The mortgage bonds in question were those issued by JPMorgan and Bear Stearns Cos. The latter was bought by JPMorgan in 2008. It would not include those issued by Washington Mutual Inc, another lender whose assets were acquired by JPMorgan also in 2008.
JPMorgan said the settlement marked an important step in the bank's efforts to find solutions for legacy-related matters on residential mortgage-backed securities or RMBS. A Bloomberg report said the latest deal marked another addition to the list of cases already resolved by the largest bank in the US. JPMorgan also agreed to settle claims from the Federal Housing Finance Agency last month. The USD 5.1 billion agreement was for the claim that the JPMorgan did not accurately represent the quality of the mortgage bonds which it sold to Fannie Mae and Freddie Mac.
In its statement, JPMorgan Chase & Co also said that it had enough reserve funds to cover the latest settlement and other litigation related to mortgage bonds.
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