JPMorgan Chase reaches $4.5B mortgage bond settlement
JPMorgan Chase & Co. said Friday it has agreed to pay $4.5 billion to settle claims by investors who lost money on mortgage-backed securities before the collapse of the U.S. housing market.
The bank reached the agreement with 21 institutional investors in 330 residential mortgage-backed securities trusts issued between 2009 and 2008 by JPMorgan and Bear Stearns, which it took over during the financial crisis.
The deal still has to be accepted by trustees for the trusts holding the securities, the bank and lawyers for the investors said.
It is separate from the preliminary $13-billion settlement JPMorgan has reached with the U.S. government that would resolve a raft of actions over mortgage-backed securities.
The deal is the latest in a series of legal settlements over JPMorgan's sales of mortgage-backed securities in the years preceding the financial crisis. As the housing market collapsed between 2006 and 2008, millions of homeowners defaulted on high-risk mortgages. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages. Those securities were sold by JPMorgan and other big Wall Street banks.
JPMorgan also has been negotiating with the U.S. Justice Department to settle a civil inquiry into its sales of mortgage-backed securities. The bank reached a tentative deal last month to pay $13 billion, but the negotiations have hit a stumbling block.
Mounting legal costs pushed JPMorgan to a rare loss in this year's third quarter, the first under CEO Jamie Dimon's leadership.