“We’re really starting to finally get into evidence that suggests blatant fraud,” opined a SF-based litigation consultant.  Whether that's true or not will ultimately be decided by the Securities and Exchange Commission.

The Commission reportedly issued a subpoena to JPMorgan Chase & Co. over failed mortgages, as part of its bank probe that includes Credit Suisse Group AG for allegedly failing to share refunds from sellers of faulty debt.  Credit Suisse received a subpoena last week.

Meanwhile bond insurer MBIA Insurance Corp. filed a lawsuit against 3 CS's bank’s units, and separately asked JPMorgan for information, after a court in January unsealed allegations made about Bear Stearns Cos.’ practices in another suit.  Bond insurers MBIA and Ambac Assurance Corp. have said Credit Suisse and Bear Stearns, which JPMorgan bought in 2008, demanded refunds from originators that sold the banks the loans that they packaged into bonds, and then failed to use those settlement amounts to fulfill their own contractual promises on the debt.

U.S. agencies have been seeking evidence of wrongdoing across the mortgage industry from before the market collapsed in 2007.  JPMorgan said in a regulatory filing today it’s in “advanced discussions” with the SEC to resolve an investigation into CDO's, which package assets such as mortgage bonds into new securities.  And, the Justice Department sued Deutsche Bank AG this week for over $1 billion, saying the firm lied about its process for checking the quality of loans granted federal insurance.

For further details, go to:   [Bloomberg, 5/6/11, "JPMorgan Said to Face .."]