As per a report in Bloomberg, a lawsuit against
JPMorgan Chase & Co.
) related to its faulty mortgage lending practices was recently
turned down by Justice Alan Scheinkman of New York Supreme Court,
White Plains. The ruling puts an end to the long drawn litigation
between the banking behemoth and
), the U.S.-based bond insurer. However, the insurer may re-file
the case after making relevant modifications.
The litigation originates from a pool of risky mortgage loans worth
$1.16 billion. Bear Stearns, the securities trading and brokerage
firm, which was later acquired by JPMorgan, served as the
underwriter for the same.
It was alleged that the mortgage reports generated by Bear Stearns
misled MBIA about the quality of the loans thereby inducing it to
insure them. These risky loans defaulted resulting in huge loses
for the investors and consequently for the insurers.
Nevertheless, the plea was dismissed by the judge as MBIA was
unable to prove that the decision to insure the mortgage loans was
based on manipulated reports presented by the underwriter.
Apart from JPMorgan, another Wall Street baron that was sued by
Bank of America Corp.
). The case against BofA was upheld in the Supreme Court of New
York and the settlement was reached in 2013.
Mortgage related litigations continue to haunt major global banks
Wells Fargo & Company
). Though JPMorgan disburdened most of it in the prior year, it
still faces some more legal complications. With the overall
industry headwinds pressurizing the top line, any further increase
in legal expenses is bound to prove detrimental for the company's
JPMorgan currently holds a Zacks Rank #4 (Sell).
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