JPMorgan Sets Tentative $4.5 Billion MBS Deal With Investors

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JPMorgan Chase & Co. (JPM), enmeshed in legal battles with regulators, U.S. agencies and clients, agreed to pay $4.5 billion to resolve claims with 21 institutional investors who said the bank sold faulty mortgage bonds.

The preliminary deal covers 330 mortgage bond trusts issued between 2005 and 2008, JPMorgan said in a statement today. The accord still needs approval from the trustees overseeing those securities and may be subject to court review, JPMorgan said.

The agreement would pay for repurchase demands and servicing claims on mortgage bonds issued by JPMorgan and Bear Stearns Cos., which the bank purchased in 2008. It doesn’t include disputed securities issued by Washington Mutual Inc., the failed lender whose assets were bought by JPMorgan later that year.

“This settlement is another important step in JPMorgan’s efforts to resolve legacy-related RMBS matters,” the New York-based company said in the statement, using the acronym for residential mortgage-backed securities.

The agreement would add to the tally of cases resolved by JPMorgan, the largest U.S. bank. Last month, the company agreed to pay $5.1 billion to settle claims from the Federal Housing Finance Agency that the bank misrepresented the quality of mortgage bonds it sold to Fannie Mae and Freddie Mac.

The investor group is led by the law firm Gibbs & Bruns LLP, and includes asset-management units of Goldman Sachs Group Inc., BlackRock Inc. (BLK) and Pacific Investment Management Co.

The bank has enough reserves to cover the settlement as well as any other remaining mortgage bond litigation, according to the statement.

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