The U.S. Department of Justice is in the process of investigating allegations by JPMorgan Chase that Bear Stearns provided it with misleading information about its mortgage products in the time leading up to the financial crisis.
In 2008, JPMorgan acquired Bear Stearns in a fire sale pushed by the federal government. Civil lawyers at the Justice Department are investigating whether Bear Stearns altered due diligence information provided by third parties on the quality of the mortgages it held in securities. The investment bank allegedly altered spreadsheets to disguise the loan issues by removing 50 columns of important information, Realty Today reports.
The altered information was sent to MBIA Inc., which subsequently filed suit against JPMorgan last fall and sought to recover damages from a third party that did not adequately review mortgage securitization loans.
MBIA said that Bear Stearns hired Mortgage Data Management Corp to review loan samples in 2006, alleging that the reviewers found that nearly one-third of the loans were not in compliance with federal laws, leading Bear Stearns to alter the information, according to Realty Today.
A number of investigations related to JPMorgan’s dealings with Bear Stearns are currently pending. The SEC alleges that the bank misled buyers about the quality of loans tied to $1.8 billion in residential mortgages.