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Investments

JPMorgan reaches $4.5B settlement over mortgage-bond claims

Deal resolves repurchase and servicing issues

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Mega bank JPMorgan Chase (JPM) reached a $4.5 billion agreement with 21 major institutional investors Friday to resolve legacy mortgage-backed securities issues.

The institution made a binding offer to the trustees of 330 RMBS trusts issued by Chase and Bear Stearns — a firm taken over by JPM in the wake of the financial crisis.

The settlement represents another critical step in the bank’s efforts to resolve mortgage-related legacy matters, the bank said.

"As agreed in today’s settlement, the institutional investors have committed to support the settlement and have requested that the trustees accept the settlement offer," the company said.

The announcement continued, "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 JPMorgan Chase and Bear Stearns between 2005 and 2008."

The offer will remain open until Jan. 15, 2014, but may be extended pursuant to its terms for an additional 60 days.  

The offer includes six key terms, including payment by the bank of $4.5 billion in cash to settle all representation and warranty claims as well as servicing claims that were asserted by the RMBS trusts.

Additionally, it provides for the implementation of certain servicing changes to mortgages serviced by Chase in the RMBS trusts, as well as continuation of a previously agreed tolling and forbearance agreement among the bank and the trustees while the proposed settlement is evaluated. 

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