JPMorgan Reaches $4.5 Billion Settlement With Investors
NOVEMBER 15, 2013, 6:20 PM
JPMorgan Reaches $4.5 Billion Settlement With Investors
BY JESSICA SILVER-GREENBERGhttp://graphics8.nytimes.com/images/...eInline-v3.jpgMark Lennihan/Associated Press
JPMorgan has set aside a $23 billion cushion for litigation reserves.
The checks from JPMorgan Chase just keep on coming as the nation’s largest bank works to move beyond its mortgage-related troubles.
On Friday, JPMorgan reached a $4.5 billion settlement with a group of investors over claims that the bank sold them shaky mortgage-backed securities that imploded later, leading to large losses.
The multibillion-dollar payout is separate from the tentative $13 billion settlement that JPMorgan reached with the Justice Department over the bank’s questionable mortgage practices in the run-up to the financial crisis. That deal could be announced as early as next week, according to people briefed on the settlement.
The move on Friday to settle with the group, comprising 21 institutional investors, comes as JPMorgan and its chief executive, Jamie Dimon, work to mend frayed relationships in Washington and wrap up a number of investigations dogging the bank.
The $4.5 billion will go to trustees that oversee 330 residential mortgage-backed securities trusts. The deal covers investments sold between 2005 and 2008 by JPMorgan, along with those sold by Bear Stearns— the beleaguered firm that JPMorgan scooped up in the depths of the financial crisis. But the settlement does not include claims related to mortgage-backed securities sold by Washington Mutual, another bank that JPMorgan acquired during the crisis. The deal still has to be approved by the court and by the trustees.
That group, which includes large trustees like BNY Mellon, already reached an $8.5 billion settlement with Bank of America.
The terms of the deal with JPMorgan were hashed out earlier this week, according to people briefed on the matter. Wrapping up this looming lawsuit was a priority within the bank, the people said.
“This settlement is another important step in JPMorgan’s efforts to resolve legacy related R.M.B.S. matters,” JPMorgan said in a news release referring to residential mortgage-backed securities. “The firm believes it is appropriately reserved for this and any remaining R.M.B.S. litigation matters.”
Still, JPMorgan faces lawsuits related to its mortgage practices, according to a review of JPMorgan’s corporate filings. Still pending, for example, is private litigation related to more than $100 billion worth of residential mortgage-backed securities.
Bracing for such additional legal costs, JPMorgan has set aside a $23 billion cushion for litigation reserves — a figure that the bank disclosed for the first time last month.
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