JPMorgan close to $6 bln settlement with investors: source

Reuters

By Karen Freifeld

NEW YORK, Oct 22 (Reuters) - JPMorgan Chase & Co isnearing an agreement worth close to $6 billion with a group ofinstitutional investors to settle claims over shoddymortgage-backed securities issued in the run-up to the financialcrisis, a source familiar with the talks said.

Representatives of JPMorgan and the investors met on Fridayto discuss the settlement, though the two sides have not yetagreed to formal terms, the source said.

The potential deal is separate from the preliminary $13billion settlement JPMorgan has reached with the U.S. governmentthat would resolve a raft of civil actions brought by severalenforcement agencies.

The group of more than a dozen bondholders includesBlackRock Inc, Allianz SE's Pacific InvestmentManagement Co and Neuberger Berman Inc, the sourcesaid.

Kathy Patrick, a lawyer for the investors group, did notimmediately respond to requests for comment. JPMorgan also wasnot immediately available outside regular U.S. business hours.

Patrick and her Houston-based firm, Gibbs & Bruns, alsorepresent a group of investors that struck an $8.5 billionsettlement with Bank of America Corp in 2011 oversimilar allegations stemming from the bank's Countrywide unit. ANew York state judge is weighing whether to approve that dealafter American International Group Inc and othersobjected, arguing that it was too small.

In 2011, the law firm said its investor clients hadinstructed trustees overseeing $95 billion of securities issuedby JPMorgan's affiliates during the housing boom to investigatewhether the bonds were backed by ineligible mortgages.

The firm said its clients represented holders of more than25 percent of the voting rights in the securities, whichincluded bonds from Bear Stearns and Washington Mutual, twofirms that JPMorgan took over during the financial crisis.

JPMorgan reported a third-quarter loss earlier this month,the first under CEO Jamie Dimon, after recording a $7.2 billionafter-tax expense to add money to its legal reserves inanticipation of settling the U.S. government's mortgage claims.

The company had $23 billion in its legal reserves as of theend of the quarter.

Two sources familiar with the matter told Reuters thatJPMorgan's tentative $13 billion settlement with the U.S.government could end up costing the bank closer to $9 billionafter taxes, because the majority of the deal was expected to betax deductible.

The settlement talks were reported earlier by The FinancialTimes and The Wall Street Journal.

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