Dec. 21 (Bloomberg) -- WMC Mortgage LLC was sued by the securities administrator for a mortgage trust, which accused the subprime loan originator of breach of contract that caused more than $550 million in damages.
The trust was formed as part of a $1.9 billion residential mortgage securitization sponsored by JP Morgan Mortgage Acquisition Corp. and serviced by JPMorgan Chase Bank NA, according to the suit, filed yesterday in New York State Supreme Court in Manhattan.
The suit was filed by Bank of New York Mellon in its capacity as securities administrator of the trust, according to court filings. WMC Mortgage was bought by a unit of General Electric Capital Corp. in 2004 and operated as its mortgage lending arm until it was sold in 2007.
A review of the trust revealed more than 3,000 mortgages with “material and adverse” breaches of information regarding characteristics of the loans, including misrepresentations as to the occupancy of the owner, according to the suit.
Defects included “repeated failure to adhere to sound underwriting practices, a blatant disregard for a borrower’s ability to repay the loan, and intentional ignorance of warning signs of fraud,” according to the suit.
Russell Wilkerson, a spokesman for General Electric Capital Corp., and Justin Perras, a spokesman for JPMorgan Chase & Co., declined to comment on the case.
Bank of New York Mellon sued WMC Mortgage in the same court in August, acting as a trustee of a separate trust that was formed as part of a $680 million mortgage securitization sponsored by the former GE unit and affiliates. That suit seeks more than $260.2 million in damages.
The case is J.P. Morgan Mortgage Acquisition Trust, Series 2006-WMC4, by the Bank of New York Mellon, solely in its capacity as the securities administrator, v. WMC Mortgage LLC, 654464/2012, New York State Supreme Court, New York County (Manhattan).
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