Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Washington Mutual Inc. – acquired by JPMorgan Chase & Co. (JPM - Analyst Report) in 2008 – and Citigroup, Inc. (C - Analyst Report) are encountering legal charges in connection with issues arising out of the sale of mortgage-backed securities (MBS). Integer Program LLC sued these two firms for incurring huge losses from mortgage loans.

Integer has accused Washington Mutual and Citi of breaching an agreement related to mortgage loan purchase entered by these two institutions in 2007. As a result of this agreement, Integer incurred a total loss exceeding $301 million.

As per the lawsuit filed by Integer, residential mortgage loans, in excess of 4600, were securitized by Washington Mutual. Consequently, these mortgage-backed securities were sold to Integer. Of these, the alleged breaches took place on over 1,400 loans.

Prior to the closing of the offer date of the certificates to the public, more than 60 mortgage loans were delinquent. Further, it is alleged that both JPMorgan and Citi were well aware of the associated risks. However, despite being acquainted with the existing breaches in the securities, JPMorgan and Citi did not take any steps to rectify them.

Similar Charges Earlier

Earlier in 2013, JPMorgan was sued by National Credit Union Administration (NCUA), the U.S. regulator for credit unions, for misrepresentation in the underwriting and sale of MBS worth over $2.2 billion, which were sold to the U.S. Central, Western Corporate and Southwest Corporate federal credit unions (FCUs) by Washington Mutual.

Further, many other global giants, including Morgan Stanley (MS - Analyst Report) and The Goldman Sachs Group, Inc. (GS - Analyst Report), are battling similar lawsuits related to MBS.

Our Viewpoint

Such charges are expected to result in increased legal risks, which might pose a threat to the companies’ financials going forward. Moreover, it is apprehended that litigation overhangs might tarnish the image of these banking majors.

JPMorgan currently carries a Zacks Rank #2 (Buy), while Citi carries a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%