JPMorgan Chase & Co. (JPM), poised to resolve U.S. probes into sales of mortgage-backed securities, also is in settlement talks with the bonds’ buyers who are seeking at least $5.75 billion, the Wall Street Journal wrote.
A group of investors including asset managers BlackRock Inc. (BLK) and Neuberger Berman Group LLC has been negotiating with the bank during the past year to recoup losses incurred when underlying loans soured, according to the newspaper, which cited unidentified people familiar with the talks. While JPMorgan is nearing a roughly $6 billion settlement, an agreement isn’t imminent and the amount may change, the Financial Times wrote in an earlier report yesterday.
Discussions with investors are separate from JPMorgan’s tentative $13 billion deal reached with the U.S. Department of Justice last week to resolve state and federal civil claims over the packaging of mortgages into bonds. Chief Executive Officer Jamie Dimon, 57, is pushing to end legal woes that forced the lender to book a $7.2 billion charge in the third quarter, leading to the firm’s first loss under his command.
JPMorgan, the largest U.S. bank, accounted for a potential payment to the investor group when taking the third-quarter charge, the Journal wrote, citing an unidentified person close to the firm. Mark Kornblau, a spokesman for JPMorgan, declined to comment. Kathy Patrick, a lawyer with Gibbs & Bruns LLP who has represented the investor group, didn’t respond to messages seeking comment.
Banks are facing investor demands to buy back loans made before the housing crisis, alleging the debts didn’t adhere to stated underwriting standards. Mortgages packaged into securities later defaulted, causing billions of dollars in losses for investors holding the instruments.
Bank of America Corp., the second-largest U.S. lender, reached an $8.5 billion accord with 22 institutional investors in Countrywide mortgage-backed securities. That settlement, which was originally reached in 2011 and is still awaiting judicial approval, would resolve claims that Countrywide is contractually obliged to compensate investors for underlying mortgages that went into default.
JPMorgan’s deal with the Justice Department would include about $3 billion for states and federal regulators, much of which may be passed on to investors who bought faulty mortgage-backed securities, according to two people briefed on the matter.
The pact would resolve claims that the bank, Bear Stearns Cos. and Washington Mutual Inc. misleadingly packaged and sold mortgage-backed securities, the people said. JPMorgan acquired both lenders at the government’s urging as the pair teetered on collapse amid 2008’s credit crisis.