JPMorgan reaches $4.5 billion settlement with mortgage investors
By James O'Toole@jtotooleNovember 15, 2013: 6:50 PM ET
NEW YORK (CNNMoney)
JPMorgan announced a $4.5 billion settlement Friday with institutional investors who suffered losses on mortgage securities purchased from the bank in the run-up to the financial crisis.
The deal resolves one of JPMorgan's many legal headaches in connection with securities tied to risky mortgages it allegedly sold while misrepresenting their quality. The bank called it "another important step" in addressing these issues.
The settlement still requires approval from a court and from the trustees who managed the mortgage pools. The payment would be allocated by a financial expert chosen by the trustees.
The deal relates only to JPMorgan(JPM) and Bear Stearns, and does not include securities associated with Washington Mutual. JPMorgan acquired ailing Bear and WaMu during the financial turmoil of 2008.
Mortgage-backed securities and related derivatives were a key cause of the financial crisis, saddling financial institutions with huge losses as the housing market cratered.
In July, the bank agreed to pay $410 million to settle charges that it manipulated electricity prices in California and the Midwest. It is also facing scrutiny over its hiring practices in China and its alleged involvement in the Libor rate-fixing scandal.
JPMorgan posted a loss for the third quarter based on its massive legal expenses. CEO Jamie Dimon called the loss "painful" and warned that litigation costs could continue to be a drag on earnings at the nation's largest bank for several quarters.