JP Morgan Chase & Co. has agreed to pay $388,000,000 to resolve an investor class action that alleged the firm misrepresented underwriting standards for $10 billion worth of mortgage-backed securities. Without admitting any wrongdoing, JPMorgan entered into the settlement deal with the Laborers Pension Trust Fund for Northern California and the Construction Laborers Pension Trust for Southern California, which are representing a class of investors in nine public offerings issued before the financial meltdown. The resolution still needs court approval
Counsel for the plaintiffs said Friday the settlement amount represents, on a percentage basis, the biggest recovery ever achieved in a mortgage-backed securities purchaser class action and is more than two-and-a-half times greater than the average percentage recovery in any previous mortgaged backed securities (MBS) class settlement. The proposed settlement came on the heals of the court's partially granting the investors’ bid for class certification, finding they had met predominance requirements for liability, but not for damages.
The case was filed in 2009 alleging that New York-based JPMorgan made false representations about the quality of mortgages underlying a series of securities it issued in 2007 in public offerings. The lead plaintiffs alleged that rather than being filled with quality mortgages, the securities were stuffed with subprime home loans that exploded when the housing bubble burst beginning in 2007, a familiar story and the subject of multiple lawsuits against the words largest financial institutions.
The investors claimed that underwriting standards in the offering documents were abandoned, that appraisers falsified appraisal values and failed to follow industry standards, and that loan-to-value ratios set out in the offering documents were false. The case was settled at mediation with the Plaintiff's counsel indicating the offer was reasonable and fair.
JPMorgan did not immediately respond to a request for comment.
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