It’s really no surprise that after 2008 a lot of people have lost their confidence in banks and their ability to protect their assets. All in all, investors, consumers and regulators have shifted their attitude towards banks. JPMorgan Chase is getting sued for $95 million over mortgage loans bundled into securities.
According to Reuters, JPMorgan Chase & Co has been sued for $95 million by the trustee for securities marketed in 2005 by former Bear Stearns Cos over alleged misrepresentations regarding the underlying mortgage loans.
Court documents show that US Bank NA’s objective is to force JPMorgan Chase & Co to buy back the mortgage loans because of alleged breaches of representations and warranties regarding the Bear Stearns Asset Backed Securities Trust 2005-4, for which it serves as trustee.
The allegations say that JPMorgan has “materially breached” representations about loans backing the securities.
JPMorgan Chase and EMC Mortgage Group bought Bear Stearns in 2008 at a huge discount, for $2 a share, after the company was in danger of default. According to analysts, the bank got a 93 percent discount for Bear Stearns. JPMorgan Chase agreed to pay $236 million for the firm saying it was guaranteeing the trading obligations of Bear Stearns and its subsidiaries.
This isn’t the only legal action initiated against JPMorgan Chase & Co. German lender HSN Nordbank has sued several banks, including Ally Financial, JPMorgan Chase, Barclays Capital Inc. and Credit Suisse Securities, over losses on $130.2 million in mortgage bond investments.
HSN Nordbank says that JPMorgan Chase and Ally Financial have presented it with documents for securities that contained “material misrepresentations and omissions” about the mortgage bonds backing them up.
“The offering materials also contained material misrepresentations about the securities’ credit ratings, which understated the securities’ risk profile,” mentioned HSN Nordbank in the court filing.
The German lender also claims that the U.S. banks have provided documents that were inaccurate regarding the legal validity of assignments of loans to mortgage-securitization trusts and the rights of the trusts to receive interest and principal payment on the loans.
If similar legal actions against JPMorgan Chase will develop during the upcoming months, the bank is bound to have to deal with an urgent issue. Over the past few months, the banks’s stock price has changed by 6.5 percent.