Exclusive: JPMorgan's proposed $4.5 billion deal to be accepted for most trusts

NEW YORK Fri Aug 1, 2014 3:47pm EDT

People walk by the JP Morgan & Chase Co. building in New York October 24, 2013.  REUTERS/Eric Thayer

People walk by the JP Morgan & Chase Co. building in New York October 24, 2013.

Credit: Reuters/Eric Thayer

NEW YORK (Reuters) - Trustees representing investors in JPMorgan Chase & Co's (JPM.N) $4.5 billion settlement over money-losing mortgage-backed securities are expected to accept the bank's proposal for the vast majority of their trusts, according to a person familiar with the matter.

The seven trustees overseeing the securities will accept the deal for all but perhaps two dozen of the 330 trusts included in the offer, the person said.

Trustees may poll bondholders in some trusts to see if they would pursue claims if the offer is rejected, the person said.

JPMorgan reached the $4.5 billion agreement in November with 21 institutional investors in 330 residential mortgage-backed securities trusts issued by JPMorgan and Bear Stearns, which it took over during the financial crisis.

The trustees, including Bank of New York Mellon (BK.N) Deutsche Bank National Trust Co. [DBKGN.UL] and HSBC Bank USA, [HBABU.UL] face a Aug. 1 deadline for a decision on whether to accept the offer.

JPMorgan does not have to go through with the deal if the number of trusts that reject the deal are in excess of a confidential limit the parties negotiated.

A JPMorgan spokesman declined comment.

An expert for the trustees, Daniel Fischel, said in a July 17 report that before a trustee rejects the proposed settlement for any trust, the trustee should be confident that there's a group willing to pursue claims.

In the report, Fischel recommended that the proposed settlement be accepted for 314 trusts and that the trustees consider rejecting the settlement for 16 trusts.

The 21 investors who agreed to the deal in November include BlackRock Inc, Metlife Inc MET.N, Allianz SE's Pacific Investment Management Company ALVG.DE, the TCW Group and Bayerische Landesbank.

The settlement does not include trusts issued by Washington Mutual, which JPMorgan also acquired.

The deal was announced just before JPMorgan reached a $13 billion settlement with U.S. government authorities over defective mortgages packed into securities before the 2008 financial crisis.

(Reporting By Karen Freifeld)