By Karen Freifeld
NEW YORK Oct 22 JPMorgan Chase & Co is
nearing an agreement worth close to $6 billion with a group of
institutional investors to settle claims over shoddy
mortgage-backed securities issued in the run-up to the financial
crisis, a source familiar with the talks said.
Representatives of JPMorgan and the investors met on Friday
to discuss the settlement, though the two sides have not yet
agreed to formal terms, the source said.
The potential deal is separate from the preliminary $13
billion settlement JPMorgan has reached with the U.S. government
that would resolve a raft of civil actions brought by several
The group of more than a dozen bondholders includes
BlackRock Inc, Allianz SE's Pacific Investment
Management Co and Neuberger Berman Inc, the source
Kathy Patrick, a lawyer for the investors group, did not
immediately respond to requests for comment. JPMorgan also was
not immediately available outside regular U.S. business hours.
Patrick and her Houston-based firm, Gibbs & Bruns, also
represent a group of investors that struck an $8.5 billion
settlement with Bank of America Corp in 2011 over
similar allegations stemming from the bank's Countrywide unit. A
New York state judge is weighing whether to approve that deal
after American International Group Inc and others
objected, arguing that it was too small.
In 2011, the law firm said its investor clients had
instructed trustees overseeing $95 billion of securities issued
by JPMorgan's affiliates during the housing boom to investigate
whether the bonds were backed by ineligible mortgages.
The firm said its clients represented holders of more than
25 percent of the voting rights in the securities, which
included bonds from Bear Stearns and Washington Mutual, two
firms that JPMorgan took over during the financial crisis.
JPMorgan reported a third-quarter loss earlier this month,
the first under CEO Jamie Dimon, after recording a $7.2 billion
after-tax expense to add money to its legal reserves in
anticipation of settling the U.S. government's mortgage claims.
The company had $23 billion in its legal reserves as of the
end of the quarter.
Two sources familiar with the matter told Reuters that
JPMorgan's tentative $13 billion settlement with the U.S.
government could end up costing the bank closer to $9 billion
after taxes, because the majority of the deal was expected to be
The settlement talks were reported earlier by The Financial
Times and The Wall Street Journal.