By Nate Raymond
NEW YORK, Nov 5 (Reuters) - JPMorgan Chase & Co lost a bid
on Monday to dismiss a U.S. regulator's lawsuit accusing the
bank of misleading Fannie Mae and Freddie Mac in their purchase
of billions of dollars worth of risky mortgage securities.
U.S. District Judge Denise Cote in Manhattan pared down
parts of the lawsuit filed by the Federal Housing Finance Agency
but allowed other allegations in the case to move forward.
The case is one of hundreds of lawsuits filed by investors
and regulators related to mortgage-backed securities, which were
at the center of the 2008 financial crisis when they sank in
value during the housing downturn. Cote's ruling could have an
impact on other lawsuits by the FHFA against banks that packaged
mortgages and sold them to investors as securities.
The FHFA has accused JPMorgan of falsely representing that
the mortgages underlying the securities followed underwriting
standards as they applied to the quality of the loans.
A spokeswoman for JPMorgan did not immediately respond to a
request for comment on the ruling. FHFA representatives also
were not immediately available for comment.
The case was one of 17 lawsuits that the agency, as
conservator for Fannie and Freddie, filed in September 2011
against Bank of America Corp, Citigroup Inc and other banks.
The FHFA sued UBS AG in June 2011, contending that the bank
misled Fannie Mae and Freddie Mac into buying $6.4 billion of
subprime and other residential mortgage-backed securities. In
May, Cote denied a motion to dismiss that case.
In the JPMorgan case, the FHFA said Fannie and Freddie had
bought more than $33 billion in mortgage-backed securities
sponsored or underwritten by the bank or two other companies it
acquired, Bear Stearns & Co Inc and Washington Mutual Bank.
JPMorgan contended FHFA didn't put forward enough facts to
back its allegations that the loans weren't underwritten
properly. It also contended the lawsuit was filed too late.
But Cote on Monday ruled that FHFA's allegations "amply
support" its claim that the securitizations' offering documents
contained false statements.
The judge dismissed some of the agency's claims. The FHFA
had accused JPMorgan of fraud over statements in the offering
documents on owner-occupancy rates and loan-to-value ratios for
the mortgages supporting the securities.
Cote said the only basis for a fraud claim was a comparison
between the figures in the offering documents and the results of
an analysis the FHFA conducted. The judge said the analysis
wasn't enough to support the allegation.
The case is Federal Housing Finance Agency v. JPMorgan Chase
& Co., U.S. District Court for the Southern District of New
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