Filed in 2007 in US District Court in Los Angles by claimants who refinanced their home loans with adjustable-rate mortgages, the lawsuit claims that the US bank and units of Bear Stearns did not divulge resetting of introductory interest rates properly.
Further, the plaintiffs alleged that the mortgage documents failed to reveal that the loan’s principal balance would increase if the borrowers reimburse the minimum monthly payment.
As per the court papers, the loans were purchased by Texas-based EMC Mortgage, the lending division of Bear Stearns, which was acquired by JP Morgan in June 2008.
The settlement will be effective following the approval of US District Judge S James Otero in Los Angeles, who will consider whether to approve the agreement or not in October this year.
JP Morgan is facing a string of legal cases, including infamous London Whale trading scandal, which forced the lender to swallow $6.2bn losses.
Over the last two years, it has incurred nearly $10bn in legal cases and at the end of June 2013 it raised its estimate of losses to more than its reserves to $6.8bn from $6bn at the end of March 2013.
Most recently, the US Federal Housing Finance Agency (FHFA) asked JP Morgan Chaseto pay $6bn to settle cases over sale of bad mortgage bonds to government-backed finance companies.
