(Adds decision made public, comments and background)
By Karen Freifeld
NEW YORK Aug 1 Trustees involved in JPMorgan
Chase & Co's proposed $4.5 billion settlement with
investors in money-losing mortgage bonds accepted the bank's
offer on Friday for the vast majority of the trusts holding the
The trustees rejected the deal for six of about 330 trusts
included in the offer, according to a notice posted on a website
run by the trustees.
Twenty seven trusts obtained an extension until Oct. 1 for
one or more loan groups.
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 the
bank took over during the financial crisis. One of the trusts
was later excluded from the deal.
The settlement would resolve claims over misrepresentations
in the quality of mortgages packaged into securities before the
collapse of the U.S. housing market.
The trustees, who included Bank of New York Mellon,
Wells Fargo Bank and HSBC Bank USA faced a
Aug. 1 deadline for a decision on whether to accept the offer.
JPMorgan does not have to go through with the $4.5 billion
deal if the number of trusts that reject the deal are in excess
of a confidential limit the parties negotiated.
Assuming it goes forward, the trustees will seek court
approval for the trusts that accept the agreement.
"We are pleased that the Trustees have accepted the
settlement for so many trusts," said Robert Madden, a lawyer
with Gibbs & Bruns, the Houston law firm that represents the
institutional investors who struck the deal.
He said the deal offers "enormous benefits."
"We believe the acceptance by the Trustees of the
overwhelming majority of the 330 trusts is a significant step
toward finalizing the settlement", a JPMorgan spokeswoman said
in a statement.
Representatives of the trustees declined to comment or did
not respond to requests for comment.
In a July 17 report, an expert for the trustees, Daniel
Fischel, recommended that the proposed settlement be accepted
for 314 trusts and that the trustees consider rejecting the
settlement for 16 trusts.
The expert said that before rejecting the proposed
settlement for any trust, the trustee should be confident a
group of investors is willing to pursue claims.
The 21 investors who agreed to the deal in November include
BlackRock Inc, Metlife Inc, Allianz SE's Pacific
Investment Management Company, the TCW Group and
The settlement does not include trusts issued by Washington
Mutual, which JPMorgan also acquired.
The offer was announced last year just before JPMorgan
reached a $13 billion settlement with U.S. government
authorities over defective mortgages packed into securities
before the 2008 financial crisis.
Bank of America Corp reached a similar deal with an
investor group in June 2011. The bank agreed to pay $8.5 billion
to resolve claims by investors in securities issued by
Countrywide Financial Corp, which Bank of America acquired in
2008. A New York judge largely approved that deal in January,
although appeals are pending.
(Reporting by Karen Freifeld; Editing by Lisa Shumaker)