JPMorgan Chase’s Mortgage Securities Settlement Opens the Door to Litigation

JPMorgan Chase, the largest bank in the United States, settled a U.S. Department of Justice claim for $13 billion dollars. The amount is one half of JPMorgan Chase’s annual profit and the largest settlement paid to the U.S. government. Along with the settlement, JPMorgan Chase made a statement which sets forth the reasons it made the settlement. According to an expert in securities lawsuits, the statement opens the door to new legal actions.

JPMorgan Chase’s Statement

JP Morgan Chase admitted in its statement that its employees and subsidiaries acted improperly. The essence of the statement is that the bank:

  • Received information that some of its mortgage-backed securities (sold between 2005-2008 before the 2008 mortgage crisis) did not meet the underwriting guidelines – making the securities “risky;”
  • The mortgage-backed securities were purchased in bundles;
  • One JPMorgan employee had noted in a letter that there were concerns about the risk of the mortgage-backed securities;
  • Another employee (from Bear Stearns) questioned whether some of the sellers of the mortgage-backed securities were reliable companies;
  • The employees and subsidiaries didn’t disclose the risky securities to investors; and,
  • The investors were harmed by the securities – many of which weren’t worth what the investors reasonably thought.

Effect of the Statement

The  lawsuit against JPMorgan Chase is one of many the U.S. government is bringing against Wall Street firms for mortgage securities violations and violations involving pensions and health care fraud. The US Today reported that Elizabeth Nowicki, a former Securities and Exchange Commission attorney, said the candor in the statement was unprecedented. Ms. Nowicki said the statement would “certainly give encouragement to plaintiff attorneys.”

There already are some active cases against JPMorgan Chase based on its known risk factor of mortgage-backed securities. So far, attempts to get a quick dismissal of the claims have been denied. Jamie Dimon, the CEO of JPMorgan Chase, says that the statement doesn’t admit a violation of the law. Still, the statement will give guidance to plaintiff’s lawyers for new lawsuits.

If your organization or company was injured by improper mortgage-security investments made by JPMorgan Chase or any other company, you may have a legal claim. Please contact Cohen, Placitella and Roth for an evaluation: (888) 375-7600.