Boston-based John Hancock is suing JPMorgan, alleging that the bank misrepresented the quality of residential mortgage-backed securities that were sold to the insurance company, causing them to suffer substantial financial losses. [via Bloomberg]
In the suit, John Hancock claims that they “purchased securities that were far riskier than had been represented, backed by mortgage loans worth significantly less than had been represented, and that had been made to borrowers who were much less creditworthy than had been represented.” It is unclear how much in damages John Hancock is seeking, the court filing states that the amount will be determined in trial.
The suit was filed today in New York Supreme Court in Manhattan.
Some of the securities noted in the filing were sold off by Washington Mutual and Bear Stearns, which JPMorgan acquired in 2008. The suit states that JPMorgan is the “successor-in-interest” for both those entities.
The suit also names Deutsche Bank, Bank of America and Goldman Sachs, claiming that the companies had an obligation to conduct due diligence on the quality of the securities in their role as an underwriter to several of the securities noted in the filing.
This is certainly not the first time that JP Morgan or any other major U.S. bank has been faced with legal action due to mortgage-related accusations. Civil lawsuits over mortgage-backed securities, one of the primary causes of the 2008 financial crisis, have proliferated in recent years as investors are faced with the fallout of mortgage security-related losses. Most recently, JP Morgan settled for $153.6 million with the Securities & Exchange Commission in June over a similar suit alleging misrepresentation of the quality of certain mortgage-backed securities.
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