CLASS ACTION SUIT INVOLVING MORTGAGE BACKED SECURITIES OF WELLS FARGO & JP MORGAN ACCEPTANCE CORPORATION

Background of the Case

On January 21, 2009, Coughlin Stoia Geller Rudman & Robbins LLP announced a class action lawsuit in the U.S. District Court for the Eastern District of New York.

The suit targeted JP Morgan Acceptance Corporation I (“JP Morgan Acceptance” or the “Depositor”), alleging violations of the Securities Act of 1933 related to the sale of billions in mortgage-backed securities between January 2006 and March 2007.

Core Allegations in the Complaint

The complaint alleged that JP Morgan’s Registration Statements and Prospectus Supplements were false and misleading because they misrepresented or omitted critical facts about the underlying mortgages:

• Borrowers did not meet prudent or maximum debt-to-income ratios required by lenders.

• Borrowers often failed to provide adequate income and asset documentation.

• Borrowers were steered into stated income/low documentation loans by lenders and brokers when they could not qualify for full-doc loans.

• Many borrowers did not have sufficient income to afford required mortgage payments, creating a mismatch between loan size and borrower capacity.

These practices inflated loan pools, weakened trust quality, and left investors exposed to much higher risk than advertised.

Trusts Named in the Lawsuit

The case covered numerous JP Morgan trusts, including:

• J.P. Morgan Alternative Loan Trusts (2006-A1 through 2006-S4)

• J.P. Morgan Mortgage Acquisition Trusts (2006-A3 through 2007-S1)

• J.P. Morgan Mortgage Acquisition Trusts (ACC, CH, HE, NC, RM, WF, WMC series)

These trusts were backed by thousands of residential mortgages—many issued under false underwriting standards.

The Collapse: What Happened Next

By the summer of 2007, the truth began to surface:

• Rising delinquencies and foreclosures revealed the poor quality of the loan pools.

• Rating agencies began placing securities on negative watch, eventually issuing broad downgrades.

• Certificates once sold as high-quality investments became illiquid and heavily devalued.

Investors were left with securities that carried far greater risk and far lower returns than originally promised.

Legal Claims and Relief Sought

The class action alleged:

• Securities Act violations due to false and misleading statements in Registration Statements.

• Misrepresentation of loan quality and borrower creditworthiness.

• Failure to disclose underwriting abuses by loan originators, brokers, and correspondents.

The plaintiff sought damages for all purchasers of Certificates traceable to the Registration Statements.

About the Law Firm

Coughlin Stoia Geller Rudman & Robbins LLP (now Robbins Geller) represented the plaintiffs. With more than 190 attorneys across the U.S., the firm has extensive experience in financial fraud litigation and a track record of recovering billions for defrauded investors.

Tags: Coughlin Stoia, HERS, JP MORGAN ACCEPTANCE CORPORATION
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