Bloomberg News

JPMorgan Is Bondholders Next Target After $8.5 Billion Deal

December 16, 2011

Dec. 16 (Bloomberg) -- A bondholder group said it may seek reimbursements from JPMorgan Chase & Co. for soured home-loan securities, after Bank of America Corp. agreed to pay $8.5 billion to resolve similar claims this year.

Investors holding $95 billion of mortgage bonds instructed the trustees for the debt to investigate whether JPMorgan included ineligible loans in the securities, according to a statement released today by Gibbs & Bruns LLP, which says it represents the group. The law firm helped secure the settlement with Bank of America in June.

“Our clients continue to seek a comprehensive solution to the problems of ineligible mortgages,” Kathy Patrick, a partner at Gibbs & Bruns, said in the statement. “Today’s action is another step toward achieving that goal.”

JPMorgan, based in New York, is a defendant in more than 10,000 legal proceedings, the company said in its third-quarter report. Demands from private investors over mortgage bonds have been “limited,” the bank said.

Joseph Evangelisti, a spokesman for JPMorgan, declined to comment.

The bondholders asked Bank of New York Mellon Corp., U.S. Bank NA, Wells Fargo & Co., Citigroup Inc. and HSBC Holdings Plc to open investigations into the pools debt issued by affiliates of JPMorgan, today’s statement said.

Bank of America’s proposed $8.5 billion settlement would resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008.

The settlement has drawn criticism from insurer American International Group Inc. and other investors. New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden have also intervened in the case, which is pending in federal court. The bondholder group has defended the settlement saying in a court filing that rejection of the deal would be “devastating” for investors.

--With assistance from Michael J. Moore and David McLaughlin in New York. Editors: Pierre Paulden, Andrew Dunn

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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