J.P. Morgan Securities and Credit Suisse Securities (USA) on Friday agreed to pay more than $400 million combined to settle charges that they mislead investors in offerings of residential mortgage-backed securities.
The Securities and Exchange Commission, in coordination with the federal-state Residential Mortgage-Backed Securities Working Group had announced the charges on Friday. The SEC said it plans to distribute the money to harmed investors. Both firms agreed to settle without admitting or denying the charges.
The SEC alleges that J.P. Morgan misstated information about the delinquency status of mortgage loans that provided collateral for an RMBS offering in which it was the underwriter. J.P. Morgan received fees of more than $2.7 million, and investors sustained losses of at least $37 million on undisclosed delinquent loans. The SEC says that “J.P. Morgan also is charged for Bear Stearns’ failure to disclose its practice of obtaining and keeping cash settlements from mortgage loan originators on problem loans that Bear Stearns had sold into RMBS trusts. The proceeds from this bulk settlement practice were at least $137.8 million.”
J.P. Morgan has agreed to pay $296.9 million to settle the SEC’s charges.