JPMorgan units concealed the truth about the poor quality of the loans underlying the securities and knew that credit ratings misrepresented their risk, BayernLB said in a lawsuit filed yesterday in New York State Supreme Court.
“This misconduct has resulted in astounding rates of default on the loans,” BayernLB said. Most of the securities have been downgraded to junk, it said.
The lender said it believed the mortgage securities were safe investments based on representations about the quality of loans and credit ratings when it invested almost $2.1 billion in 57 offerings from 2005 to 2007, according to the complaint. The lawsuit names JPMorgan and other units of the New York-based bank as defendants.
Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment on the lawsuit.
The case is Bayerische Landesbank New York Branch v. Bear Stearns & Co., 653239/2011, New York State Supreme Court, New York County (Manhattan).
To contact the reporter on this story: David McLaughlin in New York at email@example.com