In case anyone forgot about the role major Wall Street banks played in the economic and housing crisis, New York Attorney General Eric T. Schneiderman is there to remind them, filing a lawsuit against JP Morgan over Bear Stearns’ mortgage-backed securities business, which allegedly was passing off high-risk mortgages as good investments throughout much of the last decade.
JP Morgan is named primarily as the successor to Bear Stearns, which JPM took over in 2008.
The lawsuit stems from Schneiderman’s leadership of the Residential Mortgage-Backed Securities Working Group, a federal and state task force investigating the RMBS market.
The complaint says Bear Stearns ignored its own guidelines and warnings from auditors. It also indicates outside firms hired to allegedly provide an independent assessment of the RMBS portfolios understood who was buttering their bread and were working to get the securities sold.
In his press release, Schneiderman said, “Defendants were the sponsor and underwriter of an astounding number of securitzations that have gone sour. For example, as of August 2012, the cumulative losses suffered by investors in 103 subprime and Alt-A securitizations that Bear Stearns sponsored and underwrote in 2006 and 2007 totaled approximately $22.5 billion, or approximately 26% of the original principal balance of $87 billion.
“Another $30 billion in unpaid principal on mortgages remain in these trusts today. 43% percent of that amount, or $12.9 billion is currently 90 days past due, in foreclosure, in bankruptcy or considered real estate owned by a bank (REO). This means current investors are likely to suffer additional losses going forward. The Attorney General seeks investor damages to recoup losses, as well as other equitable relief. “
