A state-federal task force set up this year to investigate misconduct in the bundling of mortgage loans into securities is about to bring charges against the major mortgage lenders in a case that may exceed $50 billion.  Already, JPMorgan Chase & Co. is facing a $22.5 billion lawsuit based on the activities of Bear Stearns.  JPMorgan took over Bear Stearns in 2008 and the unit is alleged to have deceived mortgage-bond investors about defective loans backing securities they bought. Bear Stearns “systematically failed” to evaluate loans, ignored defects uncovered and “kept investors in the dark” about review procedures and problems with the loans.

 

"We do expect this to be a matter of very significant liability, and there are others to come that will also reflect the same quantum of damages," Schneiderman said in an interview yesterday with Bloomberg.  “We’re looking at tens of billions of dollars, not just by one institution, but by quite a few.”

 

The Bear Stearns mortgage unit packaged $212 billion in mortgage bonds from 2003 through 2006, according to the state’s complaint.  Losses on $87 billion of those bonds packaged during just 2 of those years total $22.5 billion so far, it estimated.

 

The case is the first legal action by the state-federal task force set up by President Barack Obama this year to investigate claims related to packaging mortgage loans into securities.  The group includes officials from the Department of Justice, the SEC, and the Department of Housing and Urban Development.

 

“There are quite a few investigations under way and we will bring cases when they’re ready,” Mr. Schneiderman said.

 

For further details, go to [Bloomberg, 10/2/12].