JPMorgan Chase & Co. (NYSE:JPM) is likely to face a class-action lawsuit in its mortgage-based securities sold before the 2009 financial crisis. As per the allegations, the bank misled its investors about the security of $10 billion worth of mortgage-based securities.
Paul Oetken, U.S. District Judge in Manhattan, agreed to a class action against JPMorgan liabilities but not against the damages. The statement came 10 months after JPMorgan Chase & Co. (NYSE:JPM) agreed to a $13 billion legal settlement against the U.S. and state probes for the sale of mortgage securities.
This class action targets investors with certificates issued before March 23, 2009 by the nine trusts created by JPMorgan excluding two out of the total eleven trusts. The primary plaintiffs in the process include Construction Laborers Pension Trust for Southern California and the Laborers Pension Trust Fund for Northern California along with their lead counsel in the matter, Robbins Geller Rudman & Dowd.
Plaintiffs claimed that the bank misled investors about the credit quality of home loans, appraisals, and the underwriting of the same in its issues certificates. JPMorgan Chase & Co. (NYSE:JPM) did argue that the case could not be classified under a class action considering over 8,000 underwriting guidelines and being based upon investment practices of several originators. Oetken rejected the argument considering it the same to be non-conclusive in the matter.
Earlier, the bank agreed to a $13 billion legal settlement last year for selling bad quality mortgage to its investors and hence, contributing towards the financial crisis. The bank agreed that it sold mortgages that should never have been sold to the investors in the first place and the large number of middlemen made the situation even worse leading to poor mortgage understanding by the investor.
This article has been written by Prakash Pandey and edited by Serkan Unal.