JPMorgan, Chicago-based funds agree to settle mortgage suit

JPMorgan Chase & Co. and AMF Funds agreed to settle a lawsuit in which the funds claimed JPMorgan gave faulty information involving residential mortgage-backed securities.

JPMorgan Chase & Co. and a Chicago- based group of funds agreed to settle a lawsuit in which the funds claimed JPMorgan gave faulty information involving residential mortgage-backed securities.

AMF Funds sued JPMorgan in New York State Supreme Court in Manhattan in February 2012, accusing the bank of making “material representations and omissions” on underwriting standards used to make mortgage loans pooled into $515.6 million of securities purchased from May 2003 to May 2007.

The two sides have reached an agreement in principle to settle the suit, according to letters filed by both sides in the past week. Watertown Savings Bank, a Massachusetts lender and former shareholder of AMF Funds, has asked to intervene in the case, which both sides oppose.

AMF Funds, managed by Shay Assets Management Inc., had about $590 million in assets under management in 2011, according to its website. Mark Arisohn, an attorney with Labaton Sucharow LLP representing the funds, and Darrell S. Cafasso, a lawyer with Sullivan & Cromwell LLP for JPMorgan, didn’t immediately return telephone calls seeking comment on the letters.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

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