Mortgage-Investor Concerns Revive Amid JPMorgan Settlement Talks

A group of mortgage-bond investors urged U.S. Attorney General Eric Holder not to let banks saddle them with costs by pledging relief for borrowers to settle U.S. investigations.

The Association of Mortgage Investors, representing mutual funds and pensions, wrote a letter Oct. 7 to Holder after reports that JPMorgan Chase & Co. (JPM) discussed settling government probes for $11 billion, including consumer relief. The letter, which doesn’t mention the firm, asks that the group be included in talks with banks to ensure costs from the settlement aren’t passed to buyers of the debt.

“We stand firmly behind the principle that parties sued by the government or third-parties should not be able to settle with assets that they do not own, namely other people’s money,” the group wrote. “We urge that any settlement must not allow bank-servicers to meet their obligations by using mortgages managed by them but which they do not 100 percent own.”

Mortgage-securities investors have criticized banks’ previous settlements, saying that efforts to ease homeowners’ burden can lower the value the instruments. The terms and size of New York-based JPMorgan’s potential settlement changed repeatedly during talks last month, a person familiar with the matter said at the time. No deal has been announced.

The Wall Street Journal reported on the letter late yesterday.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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