JP Morgan Chase and Co. has agreed to pay $500 million to settle a class-action brought by pension funds over $18 billion in mortgage-backed securities sold by Bear Stearns, according to the Wall Street Journal.
JP Morgan purchased Bear Stearns in March of 2008, as mounting investor losses in mortgage-backed securities forced the firm's collapse.
Last week, plaintiffs filed a letter in U.S. District Court in Manhattan informing the court of the agreement and asking for a deadline of Feb. 2 for both sides to lay out details for a preliminary approval of the settlement.
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JP Morgan has paid more than $20 billion to settle claims brought by the government and private investors that resulted from its acquisition of Bear Stearns and Washington Mutual Inc., according to the Journal.
The plaintiffs alleged Bear Stearns misrepresented the quality of the securities it marketed to the pension funds. The New Jersey Carpenters Health Fund and Public Employees' Retirement System of Mississippi were lead plaintiffs in the case.
In misrepresenting the quality of the loans in the securities, the firm was able to garner higher credit ratings for the investments, the plaintiffs said.
The pensions claimed they bought investments that were "far riskier than represented, not of the 'best quality' and not equivalent to other investments with the same credit ratings."
The settlement will not affect another claim against JP Morgan relating to mortgage-backed securities it marketed.
In November 2013 the bank settled claims brought by regulators relating to mortgage-backed securities for $13 billion. It has also previously settled claims against securities sold by Washington Mutual.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
