August 22, 2019

August 22, 2019

Subscribe to Latest Legal News and Analysis

August 21, 2019

Subscribe to Latest Legal News and Analysis

August 20, 2019

Subscribe to Latest Legal News and Analysis

Chase Lets Loose a Barrage of New Indemnification Demand Letters

Ten years after the financial crisis, mortgage companies and regional/local banks are still getting hit with new breach of contract and indemnification claims related to loans sold before the crisis. The latest case in point involves demand letters that JPMorgan Chase is sending out to lenders throughout the country. The letters pertain to loans sold by originators to EMC, Bear Stearns and Chase prior to 2008. Chase then pooled those loans with loans it originated on a retail basis, depositing the pools into residential mortgage-backed securities (RMBS) trusts. Institutional investors and monoline insurers subsequently sued Chase, alleging securities fraud and other causes of action.

Chase ultimately settled with 21 institutional investors for $4 billion. Now it is seeking to recoup from originators sums that it claims to be owed as a result of the settlement payments it agreed to make. The kinds of claims that Chase is making — particularly given that these are “indemnification” claims made in the aftermath of settlement of RMBS-related allegations against Chase, which structured the RMBS transactions, selected the loans for inclusion in each “pool” of loans, and made representations, warranties and other disclosures to investors and insurers about the loans that Chase selected — raise several interesting issues, and potentially strong defenses (legally and factually), for the originators now receiving the demand letters. Originators are thus well advised to carefully and thoroughly evaluate their legal options when they receive these letters. There are a lot of grounds on which to defend against this type of threatened claim.

© 2019 Bilzin Sumberg Baena Price & Axelrod LLP

TRENDING LEGAL ANALYSIS


About this Author

Philip R. Stein, Complex Commercial Litigation Attorney Bilzin Sumberg, Law Firm
Partner

Philip R. Stein, a Partner in Bilzin Sumberg's Litigation Group, focuses his practice on complex commercial litigation. He regularly acts as lead counsel to mortgage companies, financial services companies, and large national homebuilders on a broad range of issues of importance to companies in those industries. Phil is currently devoting a substantial part of his practice to representing originators and sellers of mortgage loans throughout the country as they defend against loan repurchase claims made by banks and other investors. He also regularly assists companies...

305-350-7220