JPMorgan Won’t Detail 500,000 Loans, Trustee Says
January 26, 2011, 3:32 PM EST
By Steven Church
(Updates with investor’s loss estimate in sixth paragraph.)
Jan. 26 (Bloomberg) -- A JPMorgan Chase & Co. unit refused to give mortgage trust investors more than 500,000 loan files that would show them how many of the loans are bad and must be repurchased, a trustee said in a court filing.
A unit of Deutsche Bank AG said it has a right to the files as trustee for the investors. The investors own 99 mortgage- backed-securities trusts that were built on loans made by Washington Mutual Bank before it was seized by regulators and sold to JPMorgan in 2008 for $1.9 billion.
“These access rights are unqualified and have been unequivocally breached by JPMC,” Deutsche Bank said in court papers filed in federal court in Washington on Jan. 14.
Mortgage-bond investors have sued loan sellers like WaMu and JPMorgan or bond underwriters, accusing them of sometimes misrepresenting the quality of the underlying debt enough to trigger contractual or legal provisions requiring repurchases. So-called mortgage putbacks may cost banks and lenders as much as $90 billion, JPMorgan bond analysts said in October.
Thomas A. Kelly, a JPMorgan spokesman, didn’t immediately return a call for comment.
Deutsche Bank National Trust Co.’s suit on behalf of investors against New York-based JPMorgan and the Federal Deposit Insurance Corp. claims the trusts have lost $6 billion to $10 billion in value. WaMu expected some of the loans it put in the trusts to go bad, according to a U.S. Senate investigation cited by Deutsche Bank.
JPMorgan and the FDIC have asked a judge to throw out the case.
EMC Mortgage
JPMorgan’s EMC Mortgage said this week that it plans to turn over documents detailing the quality of loans in a mortgage trust managed by San Francisco-based Wells Fargo & Co. in an attempt to resolve a lawsuit.
Wells Fargo sued seeking access to files for more than 2,000 underlying mortgages in the Bear Stearns Mortgage Funding Trust 2007-AR2. The complaint, filed in Delaware Chancery Court, accused EMC of playing “rope a dope” and dragging its feet.
The case is Deutsche Bank National Trust Co. v. Federal Deposit Insurance Corp., 09-01656, U.S. District Court, District of Columbia (Washington).
--With assistance from Sophia Pearson in Wilmington, Delaware. Editors: Stephen Farr, Andrew Dunn
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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