Wednesday, April 3, 2013

JPMorgan Wins Dismissal of Most Dexia Mortgage Claims

(Reuters) - JPMorgan Chase & Co has won the dismissal of the vast majority of a lawsuit accusing it of misleading the Belgian-French bank Dexia SA into buying more than $1.6 billion of troubled mortgage debt.
The decision, made public Wednesday by U.S. District Judge Jed Rakoff in Manhattan, is a victory for the largest U.S. bank, in a case that gained notoriety after emails and other materials were disclosed that suggested the bank and its affiliates knew the debt was toxic, but sold it anyway.
Jennifer Zuccarelli
Dexia was not immediately available for comment. A spokesman for its U.S. law firm declined immediate comment. JPMorgan spokeswoman Jennifer Zuccarelli declined to comment.
The lawsuit is one of many accusing banks of trying to boost profit and revenue by packaging low-quality mortgages into seemingly safe securities, and simultaneously hiding the risks or failing to ensure that the loans were underwritten properly.
JPMorgan is also a defendant in litigation by the Federal Housing Finance Agency accusing 17 banks and lenders of selling roughly $200 billion of troubled mortgage securities to housing financiers Fannie Mae and Freddie Mac.
Dexia alleged it was misled about the quality of 65 RMBS certificates it bought from 51 offerings made in 2006 and 2007 by JPMorgan and the former Bear Stearns Cos and Washington Mutual Inc, both of which the bank bought in 2008.
In a two-page order, Rakoff dismissed the entire case with prejudice, meaning it cannot be brought again, apart from claims by Dexia's FSA Asset Management LLC unit over five of the certificates.
The judge said he would explain his reasoning in an opinion to be issued "in due course." On Feb. 27, he rejected JPMorgan's bid to dismiss the case in an opinion dated five months after he issued a "bottom line" holding.
It was unclear how Rakoff's order would affect prospects for a trial. The judge had said at a hearing last month that a trial could begin in early July.
The case is Dexia SA/NV et al v. Bear Stearns & Co et al, U.S. District Court, Southern District of New York, No. 12-04761.

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