JP Morgan and a group of pension funds have reached a preliminary, $500 million agreement to settle a mortgage-backed securities lawsuit, according to court filings and the Wall Street Journal.
The pension funds, including the New Jersey Carpenters Health fund and Public Employees’ Retirement System of Mississippi, represent a class of investors who purchased securities they allege were “far riskier than represented, not of the ‘best quality’ and not equivalent to other investments with the same credit ratings.”
Bear Stearns issued the nearly $18 billion worth of mortgage-backed securities in question. JP Morgan, now the world’s largest banking corporation, bought the foundering firm for $10 per share in March 2008, as the financial crisis sharply escalated.
The securities were allegedly “far riskier than represented, not of the ‘best quality’ and not equivalent to other investments with the same credit ratings.”
On Thursday, lawyers for the pension funds filed a letter with the presiding New York judge indicating a preliminary settlement had been reached.
“Following extensive negotiations,” the letter stated, “the parties have reached agreement and executed a binding term sheet containing the material terms of the settlement.”
Both JP Morgan and the suing investors have until February 2 to submit detailed outlines of the settlement terms, which will then need to be approved by the court.
Related Content: Following JP Morgan, Dutch Pension ABP Sues Credit Suisse Over Mortgage-Backed Securities