JP Morgan Class Action Lawsuit Over Mortgage-Backed Securities to Proceed
A federal judge has cleared the way for a $10 billion class action lawsuit against JP Morgan to proceed, over its handling of mortgage-backed securities before the 2008 financial crisis.
The JP Morgan lawsuit was filed by investors in 2009, alleging that the financial firm mislead them regarding the safety of securities it was selling.
On Tuesday, U.S. District Judge Paul Oetken certified the action as a class action, rejecting JP Morgan’s objections over the lawsuit.
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According to the complaint, JP Morgan purposefully misled investors about the credit quality of the home loans, the underwriting process and other factors key to the health of the mortgage-backed securities. The lawsuit claims that the appraisals used were false, as were loan-to-value ratios.
The mortgage-backed securities market plummeted due to the sub-prime mortgage loan crash that is often blamed for the recession that followed. In the best cases, those invested in the JP Morgan-backed securities only recovered 62% of their investment.
While Judge Oetken certified the class action, he did not verify the amount of damages plaintiffs could claim, saying that there needs to be more evidence to confirm the amount of losses they suffered.
The lawsuit’s lead plaintiffs involve pension funds from California.
JP Morgan has reached a $13 billion settlement with the Justice Department over its sale of the mortgage securities, about $1 billion of which has so far been spent to help homeowners who could lose their homes as a result.
The company has reportedly cut the mortgage balances of nearly half a million homeowners by $7.6 billion to help them stay in their homes as part of the Justice Department settlement.
kayApril 25, 2017 at 4:23 am
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