JPMorgan Chase & Co. was sued by Manulife Financial Corp.’s John Hancock Life Insurance unit, which accused the bank of fraud in connection with the sale of residential mortgage-backed securities.
The lawsuit, filed today in New York state Supreme Court in Manhattan, seeks unspecified damages for losses of market value and principal and interest payments, as well as rescission and recovery of payment for the investments.
John Hancock bought the securities “in reliance on the false and misleading” statements made by the defendants, which include Bear Stearns & Co. and Washington Mutual Inc., both of which were acquired by JPMorgan, lawyers for the Boston-based insurer said in the lawsuit.
“Based on these material misrepresentations and omissions, plaintiffs purchased securities that were far riskier than had been represented, backed by mortgage loans worth significantly less than had been represented, and that had been made to borrowers who were much less creditworthy than had been represented,” attorneys for John Hancock said in the lawsuit.
Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.
Jennifer Zuccarelli, a spokeswoman for JPMorgan, didn’t immediately return a telephone message left at her office seeking comment on the lawsuit.
The case is John Hancock Life Insurance Co. v. JPMorgan Chase & Co., 650195/2012, New York state Supreme Court (Manhattan).