Ambac says JPMorgan refused mortgage repurchases

January 25, 2011 by · Leave a Comment
Filed under: Industry News 

Very interesting that JP will not buy-back the paper is purchased as part of the Bear Sterns acquisition.  Not surprising though.  If I had a bunch of known bad or even worst, fraudulent, I would not want to buy it back either.   It would be a instant loss when you write it off.  The article mentions there is over $90 billion dollars of the paper running around like the boogeyman.   If the official number is $90 billion, I am going to assume at least twice that is actually out there.

JP Morgan is digging in, they have set aside a whooping $1.5 billion dollars in legal fees to use to litigate other financial institutions that are going force the issue and make them purchase the paper back.  In closing, a conference call was quoted and I am going to quote it here, “”It’s going to be a long ugly mess”.

Bloomberg – Ambac Assurance Corp., the debt guarantor partly seized last year by Wisconsin’s insurance commissioner, made the claim in a proposed amended complaint in its lawsuit against Bear Stearns’s EMC Mortgage unit, now owned by JPMorgan. Ambac, seeking to add a fraud claim to the case, referenced depositions, e-mail and letters in the filing, which was unsealed Jan. 14 in Manhattan federal court.

Mortgage-bond investors and other insurers, including Allstate Corp., Pacific Investment Management Co. and MBIA Inc., have accused loan sellers or bond underwriters of sometimes misrepresenting the quality of the underlying debt enough to trigger contractual or legal provisions requiring repurchases. So-called mortgage putbacks may cost banks and lenders as much as $90 billion, JPMorgan bond analysts said in an October report.

Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, declined to comment on the filing, which the company had fought to keep secret. A federal judge must still rule on whether to allow the amended complaint to go forward.

Insured Bonds

Bear Stearns sought on March 11, 2008 — just weeks before the collapsing company agreed to be bought by JPMorgan — to have a lender buy back mortgages in bonds insured by Syncora Guarantee Inc., according to the filing. Bear Stearns said the mortgages failed to meet promised standards of quality.

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