JPMorgan's $4.5B Mortgage-Bond Settlement Mostly Accepted
Mortgage-bond trustees rejected a part of JPMorgan Chase & Co.'s $4.5 billion settlement offer over investor claims of faulty mortgages while accepting the deal for most of the transactions.
The accord is being declined by trustees for five of the 330 mortgage-bond deals and part of another, according to a notice posted online yesterday by trustees including Bank of New York Mellon Corp., Wells Fargo & Co. and Deutsche Bank AG. A decision was delayed until Oct. 1 for part or all of 27 other transactions, according to the website.
The deadline for accepting the proposed settlement, which JPMorgan offered in November, had been pushed back several times.
"We believe the acceptance by the trustees of the overwhelming majority of the 330 trusts is a significant step toward finalizing the settlement," New York-based JPMorgan said in an emailed statement.
The lack of a more sweeping approval may leave the bank exposed to a larger payout. JPMorgan negotiated the proposed agreement with 21 institutional investors including BlackRock Inc. and Pacific Investment Management Co. in a bid to move past legal troubles tied in part to the housing crisis. The accord was announced the week before the largest U.S. bank agreed to a record $13 billion settlement with government agencies over faulty mortgage securities.
"Though the trustees sought and obtained an extension for a handful of trusts, we expect most of those trusts will also accept unless a group of investors comes forward to direct litigation, agree to pay for it, and also agrees to indemnify the trust against the lost value of this very beneficial settlement," Kathy Patrick, a lawyer at Gibbs & Bruns LLP representing the investors who negotiated the deal, said in an emailed statement.
Spokesmen for the trustees either declined to comment or didn't return emails seeking comment.