CHICAGO, April 4, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), The Goldman Sachs Group Inc. (NYSE: GS), HSBC Holdings Plc (NYSE: HBC) and U.S. Bancorp (NYSE: USB).
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Here are highlights from Tuesday's Analyst Blog:
JPMorgan Sued Over Mortgage Losses
Two financial organizations, Ambac Financial Group Inc. and DZ Bank AG, sued JPMorgan Chase & Co. (NYSE: JPM) over the losses that these companies have incurred due to mortgage-backed securities (MBS). These firms alleged that JPMorgan made false representations while selling these MBS to them.
Ambac has legally charged Bear Stearns and EMC Mortgage units of JPMorgan, accusing them of deceptively persuading it to enter into MBS transactions. Ambac, in its litigation, further stated that it had to incur huge losses (nearly $1.83 billion) from MBS transactions. EMC Mortgage was a unit of Bear Stearns, which JPMorgan acquired in 2008.
Likewise, DZ Bank, Germany's largest co-operative lender, has also filed a lawsuit against JPMorgan for making misleading statements while selling residential MBS. The firm is seeking nearly $402 million in damages. The firm claims that the documents used for offering the securities contained untrue statements or omissions about how risky the investments might be. Misinterpretation of these risks led to investments, which have virtually no value at current levels.
Similar Litigations
Over the last several quarters, JPMorgan and many other large U.S. banks including Bank of America Corporation (NYSE: BAC) and The Goldman Sachs Group Inc. (NYSE: GS) have also been accused of misrepresenting documents related to MBS. Most of these are related to the sale of MBS during the height of housing bubble that later led to the financial crisis in 2008.
Earlier in January, DZ Bank had filed a lawsuit against JPMorgan and HSBC Holdings Plc (NYSE: HBC) for breaching representations and warranties. The complaint lodged claims that both companies had misrepresented documents related to the sale of residential MBS over $85 million and $122 million, respectively.
Similarly, in January, the US Bank NA, a unit of U.S. Bancorp (NYSE: USB), filed a lawsuit against JPMorgan for misrepresenting documents related to the sale of over $95 million in MBS marketed in 2005 by the former Bear Stearns.
Moreover in December 2011, JPMorgan along with Ally Financial Inc. was hauled to court by HSH Nordbank AG, a German lender, for the similar issues in the sale of $293 million in mortgage bonds.
Conclusion
We believe that these litigations may negatively impact JPMorgan's financial results going forward. However, shares of JPMorgan currently retain a Zacks #2 Rank, which translates into a short-term Buy rating.
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