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Massive RMBS Settlement Disclosed by Chase

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A multi-billion dollar settlement has been reached with investors of residential mortgage-backed securities by JPMorgan Chase & Co.

Chase disclosed Friday the settlement with 21 major institutional investors of RMBS issued by Chase and subsidiary Bear Stearns.

The New York-based company said the agreement calls for a binding offer to be made to the trustees of 330 RMBS trusts.

Chase will make a $4.5 billion cash payment as part of the settlement, though that amount can be offset by claimed damages by securities plaintiffs. It will also implement changes to its servicing on loans in the 330 trusts.

In addition, the settlement includes “continuation of a previously agreed tolling and forbearance agreement among J.P. Morgan and the trustees while the trustees evaluate the proposed settlement.”

The investors are requesting that the trustees accept the settlement offer. The trustees can seek court approval for the settlement.

Chase noted that the settlement would resolve all representation and warranty claims as well as servicing claims on all trusts issued by J.P. Morgan, Chase and Bear Stearns between 2005 and 2008.

RMBS issued by Washington Mutual are not part of the deal.

The investors were all represented by a single law firm:  Gibbs & Bruns LLP.

“This settlement is another important step in J.P. Morgan’s efforts to resolve legacy related RMBS matters,” a statement said. “The firm believes it is appropriately reserved for this and any remaining RMBS litigation matters.”

The offer will remain open until Jan. 15, 2014, though it can be extended by 60 days.

The institutional investors are:

  • AEGON USA Investment Management LLC
  • Bayerische Landesbank
  • BlackRock Financial Management Inc.
  • Cascade Investment LLC
  • Federal Home Loan Bank of Atlanta
  • Federal Home Loan Mortgage Corp.
  • Federal National Mortgage Association
  • Goldman Sachs Asset Management LP
  • ING Investment Management Co. LLC
  • ING Investment Management LLC
  • Invesco Advisers, Inc.
  • Kore Advisors LP
  • Landesbank Baden-Wuerttemberg
  • Metropolitan Life Insurance Co.
  • Pacific Investment Management Company LLC
  • Sealink Funding Limited
  • Teachers Insurance and Annuity Association of America
  • The Prudential Insurance Company of America
  • The TCW Group Inc.
  • Thrivent Financial for Lutherans
  • Western Asset Management Co.

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