Washington Mutual Inc. - acquired by
JPMorgan Chase & Co
) in 2008 - and
) are encountering legal charges in connection with issues
arising out of the sale of mortgage-backed securities (MBS).
Integer Program LLC sued these two firms for incurring huge
losses from mortgage loans.
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Integer has accused Washington Mutual and Citi of breaching an
agreement related to mortgage loan purchase entered by these two
institutions in 2007. As a result of this agreement, Integer
incurred a total loss exceeding $301 million.
As per the lawsuit filed by Integer, residential mortgage loans,
in excess of 4600, were securitized by Washington Mutual.
Consequently, these mortgage-backed securities were sold to
Integer. Of these, the alleged breaches took place on over 1,400
Prior to the closing of the offer date of the certificates to the
public, more than 60 mortgage loans were delinquent. Further, it
is alleged that both JPMorgan and Citi were well aware of the
associated risks. However, despite being acquainted with the
existing breaches in the securities, JPMorgan and Citi did not
take any steps to rectify them.
Similar Charges Earlier
Earlier in 2013, JPMorgan was sued by National Credit Union
Administration (NCUA), the U.S. regulator for credit unions, for
misrepresentation in the underwriting and sale of MBS worth over
$2.2 billion, which were sold to the U.S. Central, Western
Corporate and Southwest Corporate federal credit unions (FCUs) by
Further, many other global giants, including
The Goldman Sachs Group, Inc
), are battling similar lawsuits related to MBS.
Such charges are expected to result in increased legal risks,
which might pose a threat to the companies' financials going
forward. Moreover, it is apprehended that litigation overhangs
might tarnish the image of these banking majors.
JPMorgan currently carries a Zacks Rank #2 (Buy), while Citi
carries a Zacks Rank #3 (Hold).