Wednesday, December 7, 2011

JPMorgan to Fight Mortgage Investors for 'Years': Dimon

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JPMorgan to Fight Mortgage Investors for 'Years': Dimon

Shanthi Bharatwaj

12/07/11 - 02:49 PM EST
NEW YORK (TheStreet) --JPMorgan Chase(JPM) CEO Jamie Dimon told investors Wednesday that the bank has built significant reserves for mortgage-related claims, but will emerge victorious from a prolonged litigation battle.

"We have hired top lawyers", Dimon said, and the bank has numerous legal and technical defenses, including the fact that investors were sophisticated and that the disclosures were clear. He also said damages are difficult to prove because so much of the loss may have stemmed from economic decline. "Housing prices fell 40%; hard to argue it was due to something else," he said.

JPMorgan Chase CEO Jamie Dimon
The bank faces litigation over $54.9 billion of original mortgage balances (excluding Washington Mutual) in the form of securities lawsuits and repurchase claims. But investors demanding repurchases are also likely to face substantial hurdles in challenging the bank.

"In either case, claimants are potentially facing years of litigation," Dimon said in his presentation.
In the case of repurchase claims, investors have to do a loan-by-loan analysis in order to prove that a breach in underwriting standards "materially and adversely" affected the value of the loan. The process can be lengthy and decidedly more difficult for private label investors compared to the GSE experience, according to Dimon.

The FHFA has the right to subpoena this information on behalf of Fannie Mae and Freddie Mac, but private label investors need to file a lawsuit to obtain these files or require about 25% to 50% of investor voting rights to get the trustee to obtain this information from the servicer.

He added that there is a significant overlap between repurchase and securities exposure. "We do not intend to pay twice for the same exposure," he said.

--Written by Shanthi Bharatwaj in New York

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