Banking and Finance

JPMorgan Offers $4.5 Billion Settlement to Mortgage-Backed Securities Trustees

 NEW YORK — (Mealey’s) JPMorgan Chase & Co. will issue a binding offer to the trustees of 330 residential mortgage-backed securities (RMBS) trusts that were issued by J.P. Morgan Chase and Bear Stearns, after reaching a $4.5 billion agreement with 21 institutional investors, according to a JPMorgan press release issued Nov. 15.

Under the terms of the settlement, JPMorgan will pay $4.5 billion in cash “to settle all representation and warranty claims as well as servicing claims that have been or could have been asserted by the 330 RMBS trusts.” 

JPMorgan will also reserve the right “to seek offset or credit payment made or benefit conferred under this settlement against or in reduction of any claimed damages by securities plaintiffs,” implement “certain servicing changes to mortgage loans serviced by J.P. Morgan in the 330 RMBS trusts” and continue a “previously agreed tolling and forbearance agreement among J.P. Morgan and the trustees while the trustees evaluate the proposed settlement.”

Warranty Claims

According to the press release, “the institutional investors have committed to support the settlement and have requested that the trustees accept the settlement offer.  The offer, which the trustees may seek court approval for, would resolve all representation and warranty claims as well as servicing claims on all trusts issued by J.P. Morgan, Chase and Bear Stearns between 2005 and 2008.  While this agreement would resolve representation and warranty claims as well as servicing claims facing the firm with respect to J.P. Morgan, Chase and Bear Stearns trusts, it does not resolve claims on trusts issued by Washington Mutual.”

“The offer will remain open until January 15, 2014, but may be extended pursuant to its terms for an additional sixty days,” according to the press release.

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