Zacks Equity Research analysts warn that legal tussles about past mortgage-backed security deals faced by JPMorgan Chase & Co., Citigroup Inc. and other megabanks are bound to lead to increased legal risk.
Most recently Integer Program LLC sued Washington Mutual Inc., which was acquired by JPMorgan Chase in 2008, and Citigroup on grounds of incurring “huge loan losses” due to issues with the sale of mortgage-backed securities, Zacks said.
Integer has accused Washington Mutual and Citi of breaching an agreement following a 2007 agreement that resulted in Integer incurring a total loss exceeding $301 million.
Integer’s lawsuit involves over 4,600 residential mortgage loans securitized by Washington Mutual and sold to Integer.
It alleges that breaches took place on over 1,400 of these loans, as more than 60 of these MBS loans were delinquent prior to the closing of the offer date of the certificates to the public.
The lawsuit also alleged that both JPMorgan and Citi were aware of the breaches in the securities and associated risks but “did not take any steps to rectify them.”
Earlier this year the National Credit Union Administration sued JPMorgan “for misrepresentation in the underwriting and sale of MBS worth over $2.2 billion,” that were sold to the U.S. Central, Western Corporate and Southwest Corporate Federal Credit Unions by Washington Mutual.
These
In the analysts view, such charges may “result in increased legal risks, which might pose a threat to the companies' financials going forward.” Moreover, they note, such litigation “might tarnish” their
