JPMorgan Chase & Co. (NYSE:JPM) has reached a proposed US$4.5 billion settlement deal with institutional investors concerning claims against the bank for various residential mortgage-backed securities (RMBS) issued in the run up to the financial crisis.
The U.S. banking giant said Friday that it has reached an agreement with 21 major institutional investors to make a binding offer to the trustees of 330 RMBS. Under the agreement, the institutional investors have committed to support the settlement and have requested that the trustees accept the settlement offer.
The firm says that the offer, which the trustees may seek court approval for, would resolve all representation, warranty, and servicing claims on all trusts issued by JPMorgan, Chase and Bear Stearns between 2005 and 2008. However, it would not resolve claims on trusts issued by Washington Mutual.
The offer is to remain open until January 15, 2014, but may be extended for an additional sixty days. It would see JPMorgan pay $4.5 billion in cash to settle all claims that have been, or could have been, asserted by the 330 RMBS trusts.
It would also require the implementation of certain servicing changes to mortgage loans serviced by JPMorgan in the 330 trusts. JPMorgan has reserved the right to seek offsets against any claimed damages by securities plaintiffs. And, the deal would continue a previously agreed tolling and forbearance agreement among JPMorgan and the trustees while the trustees evaluate the proposed settlement.
“This settlement is another important step in JPMorgan’s efforts to resolve legacy related RMBS matters,” it says, adding that it believes it is appropriately reserved for this, and its remaining RMBS litigation.