JPMorgan Chase & Co. has reached a $4.5 billion settlement with investors who said the bank deceived them about bad mortgage investments.
The settlement, announced Friday, covers 21 major institutional investors, including JPMorgan competitor Goldman Sachs, BlackRock Financial Management, and Metropolitan Life Insurance Co. The mortgage-backed securities were sold by JPMorgan and Bear Stearns from 2005 to 2008.
The deal is the latest in a series of legal settlements over JPMorgan’s sales of mortgage-backed securities in the years preceding the financial crisis. As the housing market collapsed from 2006 to 2008, millions of homeowners defaulted on high-risk mortgages. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages. Those securities were sold by JPMorgan and other big Wall Street banks.
New York-based JPMorgan has said that most of its mortgage-backed securities came from investment bank Bear Stearns and savings and loan Washington Mutual, troubled companies that JPMorgan acquired in 2008.
Mounting legal costs pushed JPMorgan to a rare loss in this year’s third quarter, the first under CEO Jamie Dimon’s leadership. The bank reported Oct. 11 that it set aside $9.2 billion in the July-September quarter to cover the string of legal cases against the bank.
JPMorgan said it has placed a total of $23 billion in reserve to cover potential costs.
The $4.5 billion that JPMorgan is paying investors compares with its record net income of $21.3 billion, or $5.20 a share, in 2012, which made it one of the most profitable U.S. banks last year.