(Updates with share price in ninth paragraph.)
Sept. 15 (Bloomberg) -- JPMorgan Chase & Co.’s EMC Mortgage unit was sued by Wells Fargo & Co., the trustee for a mortgage portfolio, for refusing to buy back more than $558 million in defective home loans.
EMC rejected “repeated repurchase demands” for the loans in the Bear Stearns Mortgage Funding Trust 2007-AR2, San Francisco-based Wells Fargo said in a public version of the complaint filed yesterday in Delaware Chancery Court in Wilmington. The case was initially filed under seal.
“The loans have been plagued by an alarming rate of defaults and foreclosures,” Wells Fargo said in the complaint. “Approximately three-quarters of the loans in the trust have been modified or liquidated, or are now seriously delinquent.”
The complaint is the second Wells Fargo has filed as trustee against EMC. The trustee settled a suit brought in January after EMC agreed to turn over files for more than 2,000 underlying mortgages in the trust.
Patrick Linehan, a spokesman for New York-based JPMorgan, declined to comment on the lawsuit.
A review of 948 loan files revealed that at least 840, or about 89 percent, failed to comply with EMC’s representations and warranties, according to the complaint. As many as 1,503 mortgage loans are subject to repurchase, Wells Fargo said.
Of those 1,503 loans, 49 percent already have been liquidated, according to a letter filed as an exhibit to the complaint. Principal losses on those loans, including accrued interest, total about $214.4 million, according to the letter.
About 51 percent of the loans are still held by the trust, with an outstanding balance of about $344.5 million, according to the letter.
Shares of JPMorgan rose 88 cents, or 2.7 percent, to $33.68 at 3:47 p.m. in New York Stock Exchange composite trading. The shares have declined 19 percent this year.
The case is Bear Stearns Mortgage Funding Trust 2007-AR2 by Wells Fargo Bank NA as Trustee v. EMC Mortgage LLC, CA6861, Delaware Chancery Court (Wilmington).
--Editors: Stephen Farr, Mary Romano
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