JPMorgan reaches $388 million settlement in mortgage securities case

A view of the exterior of the JP Morgan Chase & Co. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. Five of the world's largest banks, including JPMorgan Chase & Co, were fined roughly $5.7 billion, and four of them pleaded guilty to U.S. criminal charges over manipulation of foreign exchange rates, authorities said on Wednesday. REUTERS/Mike Segar - RTX1DTPV

(Reuters) - JPMorgan Chase & Co JPM.N agreed to pay $388 million (249 million pounds) to settle a suit by investors claiming that the largest U.S. bank had misled them about the safety of $10 billion worth of residential mortgage-backed securities it sold before the financial crisis.

The lawsuit, brought by Fort Worth Employees’ Retirement Fund and other investors in offerings made before the 2008 financial crisis, accused JPMorgan of misleading them about the underwriting, appraisals and credit quality of the home loans underlying the certificates.

The lawsuit said that after Lehman Brothers Holdings Inc failed, the certificates were worth at most 62 cents on the dollar.

JPMorgan agreed to a $13 billion settlement with the Justice Department in 2013 over allegations that the bank had misled investors in mortgage-backed securities about the soundness and risks of the investments that helped bring on the subprime-mortgage crisis of 2008.

Throughout the litigation process, JPMorgan has said that the poor performance of the certificates was not due to the quality of the loans, but was caused by the collapse of the overall economy.

The $388 million settlement was disclosed in a court filing on Friday. It is subject to approval by a judge.

The case, whose caption names a different plaintiff, is Fort Worth Employees’ Retirement Fund v. JPMorgan Chase & Co, U.S. District Court, Southern District of New York, No. 09-03701.

Reporting by Sneha Banerjee in Bengaluru; Editing by Leslie Adler