World Economy

JPMorgan Faces $10b MBS Case

JPMorgan Faces $10b MBS CaseJPMorgan Faces $10b MBS Case

A federal judge said JPMorgan Chase & Co must face a class action lawsuit by investors who claimed the largest US bank misled them about the safety of $10 billion of mortgage-backed securities it sold before the financial crisis, Reuters reported.

US District Judge Paul Oetken in Manhattan certified a class action as to JPMorgan’s liability but not as to damages, saying it was unclear how investors could value the certificates they bought, given how the market was “not particularly liquid.” He said the plaintiffs could try again to certify a class on damages.

Oetken ruled 10 months after JPMorgan reached a $13 billion settlement to resolve US and state probes into the New York-based bank’s sale of mortgage securities.

The class consists of investors before March 23, 2009 in certificates issued from nine of 11 trusts created by JPMorgan for the April 2007 offering. The other two trusts attracted only a handful of investors, and are the subject of other lawsuits.

Oetken named the Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California as lead plaintiffs, and their law firm Robbins Geller Rudman & Dowd as lead counsel.

A JPMorgan spokesman did not immediately respond to a request for comment. The plaintiffs’ lawyer did not immediately respond to a similar request.

The lawsuit said that JPMorgan misled prospective investors about the underwriting, appraisals and credit quality of the home loans underlying the certificates.

It said that by the time the litigation began in March 2009, six months afterLehman Brothers Holdings failed, the certificates were worth at most 62 cents on the dollar.