A New York federal judge has approved what is said to be the largest ever class action settlement involving the sale of mortgage backed securities. JPMorgan Chase & Co. has agreed to pay $500 million to settle accusations arising from the sale of $17.58 billion in Bear Stearns Cos. securities. U.S. District Judge Laura Taylor Swain agreed that the terms of the settlement were fair and should be approved.
The suit was filed on behalf of pension funds that purchased billions’ worth of securities backed by mortgages signed off on by loan originators owned by Bear Stearns. Those mortgage pools were given high investment ratings despite the poor underwriting practices underlying the loans and the lender’s overvaluation of the properties being financed, the complaint alleges. When the housing market collapsed, it took the value of the mortgage-backed securities along with it and put a huge dent in the suing unions’ pension funds.
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