JP Morgan Chase 2015 Annual Report Download - page 311

JPMorgan Chase & Co./2015 Annual Report 301
master servicers of various MBS trusts on behalf of
purchasers of securities issued by those trusts. These cases
generally allege breaches of various representations and
warranties regarding securitized loans and seek repurchase
of those loans or equivalent monetary relief, as well as
indemnification of attorneys’ fees and costs and other
remedies. Deutsche Bank National Trust Company, acting as
trustee for various MBS trusts, has filed such a suit against
JPMorgan Chase Bank, N.A. and the Federal Deposit
Insurance Corporation (the “FDIC”) in connection with a
significant number of MBS issued by Washington Mutual;
that case is described in the Washington Mutual Litigations
section below. Other repurchase actions, each specific to
one or more MBS transactions issued by JPMC and/or Bear
Stearns, are in various stages of litigation.
In addition, the Firm and a group of 21 institutional MBS
investors made a binding offer to the trustees of MBS issued
by JPMC and Bear Stearns providing for the payment of
$4.5 billion and the implementation of certain servicing
changes by JPMC, to resolve all repurchase and servicing
claims that have been asserted or could have been asserted
with respect to 330 MBS trusts created between 2005 and
2008. The offer does not resolve claims relating to
Washington Mutual MBS. The trustees (or separate and
successor trustees) for this group of 330 trusts have
accepted the settlement for 319 trusts in whole or in part
and excluded from the settlement 16 trusts in whole or in
part. The trustees’ acceptance is subject to a judicial
approval proceeding initiated by the trustees and pending
in New York state court. The judicial approval hearing was
held in January 2016, and the parties are awaiting a
decision. An investor in some of the trusts for which the
settlement has been accepted has intervened in the judicial
approval proceeding to challenge the trustees’ allocation of
the settlement among the trusts. Separately, in October
2015, JPMC reached agreements to resolve repurchase and
servicing claims for four trusts among the 16 that were
previously excluded from the trustee settlement. In
December 2015, the court approved the trustees’ decision
to accept these separate settlements. The trustees are
seeking to obtain certain remaining approvals necessary to
effectuate these settlements.
Additional actions have been filed against third-party
trustees that relate to loan repurchase and servicing claims
involving trusts sponsored by JPMC, Bear Stearns and
Washington Mutual.
Derivative Actions. Shareholder derivative actions relating
to the Firm’s MBS activities have been filed against the Firm,
as nominal defendant, and certain of its current and former
officers and members of its Board of Directors, in New York
state court and California federal court. Two of the New
York actions have been dismissed, one of which is on
appeal. A consolidated action in California federal court has
been dismissed without prejudice for lack of personal
jurisdiction and plaintiffs are pursuing discovery relating to
jurisdiction.
Government Enforcement Investigations and Litigation. The
Firm is responding to an ongoing investigation being
conducted by the DOJ’s Criminal Division and two United
States Attorney’s Offices relating to MBS offerings
securitized and sold by the Firm and its subsidiaries. The
Firm has also received subpoenas and informal requests for
information from state authorities concerning the issuance
and underwriting of MBS-related matters. The Firm
continues to respond to these MBS-related regulatory
inquiries.
In addition, the Firm continues to cooperate with
investigations by the DOJ, including the United States
Attorney’s Office for the District of Connecticut, and by the
SEC Division of Enforcement and the Office of the Special
Inspector General for the Troubled Asset Relief Program, all
of which relate to, among other matters, communications
with counterparties in connection with certain secondary
market trading in residential and commercial MBS.
The Firm has entered into agreements with a number of
entities that purchased MBS that toll applicable limitations
periods with respect to their claims, and has settled, and in
the future may settle, tolled claims. There is no assurance
that the Firm will not be named as a defendant in additional
MBS-related litigation.
Mortgage-Related Investigations and Litigation. One
shareholder derivative action has been filed in New York
Supreme Court against the Firm’s Board of Directors
alleging that the Board failed to exercise adequate
oversight as to wrongful conduct by the Firm regarding
mortgage servicing. In December 2014, the court granted
defendants’ motion to dismiss the complaint and in January
2016, the dismissal was affirmed on appeal.
The Civil Division of the United States Attorney’s Office for
the Southern District of New York is conducting an
investigation concerning the Firm’s compliance with the Fair
Housing Act and Equal Credit Opportunity Act in connection
with its mortgage lending practices. In addition, three
municipalities have commenced litigation against the Firm
alleging violations of an unfair competition law or the Fair
Housing Act. The municipalities seek, among other things,
civil penalties for the unfair competition claim, and, for the
Fair Housing Act claims, damages resulting from lost tax
revenue and increased municipal costs associated with
foreclosed properties. Two of the municipal actions are
stayed, and a motion to dismiss is pending in the remaining
action.
In March 2015, JPMorgan Chase Bank, N.A entered into a
settlement agreement with the Executive Office for United
States Bankruptcy Trustees and the United States Trustee
Program (collectively, the “Bankruptcy Trustee”) to resolve
issues relating to mortgage payment change notices and
escrow statements in bankruptcy proceedings. In January
2016, the OCC determined that, among other things, the
mortgage payment change notices issues that were the
subject of the settlement with the Bankruptcy Trustee
violated the 2011 mortgage servicing-related consent order