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JPMorgan agrees to settle SEC mortgage probes

JPMorgan Chase, the biggest U.S. bank, reached a settlement with regulators to resolve claims tied to its home-loan business and said it would buy back as much as $3 billion in shares.

The agreement in principle with the Securities and Exchange Commission covers two investigations related to mortgage-backed bonds handled by JPMorgan and Bear Stearns, which the bank acquired in 2008, New York-based JPMorgan said Thursday in a filing.

“The firm has reached an agreement in principle with the staff of the SEC to resolve” some claims,” JPMorgan said in the filing. “The agreement in principle is subject to approval by the SEC, as well as court approval.”

The SEC has issued notices to banks including JPMorgan in investigations focusing on mortgage securities and whether lenders failed to disclose underlying credit weaknesses. Goldman Sachs paid $550 million in 2010 to settle SEC claims that it misled investors on a mortgage-linked investment in 2007. In that case, Goldman Sachs said it made a “mistake” in omitting disclosures.

One investigation was related to delinquency disclosures in a single mortgage-backed security deal, JPMorgan said in the filing. The other involved claims against the lender and Bear Stearns over disclosures of settlements of disputes against originators of loans included in Bear Stearns securitizations.

The SEC warned JPMorgan in January that it may bring complaints related to mortgage securitizations, the company said in February. Goldman Sachs and Wells Fargo also said they were facing U.S. scrutiny over mortgages.

Regulators are still examining how banks packaged and sold home loans to investors more than four years after mounting mortgage defaults prompted unprecedented government bailouts of the financial system.

JPMorgan also won Federal Reserve approval to reinstate a $3 billion buyback of common shares in next year’s first quarter, according to the filing. The Fed notified the bank Nov. 5 that it reviewed the firm’s capital plan and that it wouldn’t object, the bank said.

JPMorgan announced a $15 billion repurchase program in March and suspended it in May after uncovering a trading loss at its chief investment office that eventually swelled to more than $6.2 billion. The bank was scheduled to spend as much as $12 billion on buybacks this year and up to $3 billion in the first three months of 2013.

“We regard this as very good news that will likely lift all money center banks today as it appears the Fed is still quite open to allowing stock repurchases,” Ed Najarian, an analyst at International Strategy & Investment Group, wrote in a note to clients Thursday.

Chief executive Jamie Dimon said in August that he intended to resume repurchases in the first quarter. Doing so depended on the Fed and on the board’s completion of work on the CIO’s wrong-way bets, he said.

The timing and amount of common stock and warrant repurchases depends on market conditions, JPMorgan said Thursday.

— Bloomberg News



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