As much as they tried, JP Morgan Chase could not get a suit claiming the banking giant misrepresented the quality of loans in a $1.9 billion mortgage-backed securities trust. The NY appellate court said the firm guaranteed information that later turned out to be inaccurate.
the Court affirmed a November 2013 lower court ruling that allowed investors to pursue claims against GE Capital Corp. subsidiary WMC Mortgage LLC, which originated the loans in the pool, and JPMorgan subsidiaries that purchased the loans and pooled them into a trust.
JPMorgan and its subsidiary, J.P. Morgan Mortgage Acquisition Corp. (JPMMAC), appealed the ruling but was denied. “JPMMAC warranted against the existence of any material misstatement during the warranty period, no matter when the misstatements first appeared on the Mortgage Loan Schedule or loan tape,” the opinion said.
The BNOY Mellon Corp. brought the claims in February 2013 on behalf of investors as the administrator for the trust after many of the mortgage loans became delinquent. BNOY claimed they had suffered $650 million in damages from losses in the trust and that the Public Securities Association (PSA)required JPMMAC to repurchase any faulty loans. The appellate court on Tuesday also rejected JPMorgan’s argument that the language in the PSA warranting the information about specific loans provided by WMC only applied if the information became inaccurate during the limited time period when the deal was closing in 2006.
The appellate court also found the bank's claim that the PSA was a bring-down or gap warranty because some of the relevant information, such as the 12-month history of the loans, was subject to change. The court said that because the guaranty applied to both changeable and unchangeable information, it couldn't’t have been a gap warranty.
The experienced securities litigation attorneys at Colling Gilbert Wright & Carter have litigated and resolved hundreds of FINRA arbitration claims, many involving mortgaged backed securities. If you believe you lost money due to negligence or fraud on the part of your FINRA registered broker dealer, please contact us for a free case evaluation.