The New York Times is reporting that JP Morgan did not disclose serious flaws with thousands of home loans, but instead JP Morgan bundled the flaws into complex securities that made the deals look more appealing to investors. This is according to documents filed in Federal Court on February 5th, 2013 in Manhattan.
Through internal emails and employee interviews, it was discovered through the lawsuit that JP Morgan and two of the firms that the bank acquired, Washington Mutual and Bear Stevens, ignored problems and in some cases hid them entirely in order to make a profit.
The lawsuit was filed in 2012 by Dexia, which is a Belgian-French bank. Dexia states that they were duped into buying $1.6 billion dollars’ worth of troubled mortgage-backed securities. JP Morgan has denied any wrong-doing in the case according to court filings and has offered no comment at this time according to the New York Times.
The Dexia lawsuit focuses on complex securities created by JP Morgan, Washington Mutual, and Bear Stevens during the housing boom. As soon as profits went up, they scrambled to churn out more investments regardless of questions about their quality. The loans were then quickly sold to investors. As a Bear Stevens executive explained it to employees, “we are a moving company, not a storage company,” according to the court documents.
JP Morgan usually hired third party firms to examine the home loans before they were packed into investments. The firms searched for problems like appraisals that inflated property values or borrowers who overstated their incomes.
Dexia lost $774 million in mortgage backed securities according to court records and has been bailed out twice.
This is one example of how big banks handled mortgages during the foreclosure crisis. This is why fighting your lender against the foreclosure of your home is the right thing to do. When hiring an experienced attorney to handle your foreclosure defense, it is possible that fraud can be found and it can strengthen your case is keeping your home. For more information on defending your home against foreclosure, visit www.litvinlaw.com.
To read more about the story from the New York Times click on the link below.