JPMorgan agreed to pay $995m to resolve claims by Ambac Financial Group that it was duped into insuring mortgage bonds backed by shoddy loans, paving the way for approval of a much larger settlement between the bank and institutional investors stemming from the global financial crisis.
Bloomberg News reports that a part of the accord, Ambac will drop its objections to a $4.5bn pact between JPMorgan and investors including BlackRock and Pacific Investment Management Co. centres on claims of faulty home loans. That brings the banking industry one step closer to resolving litigation over the "toxic" mortgage debt that fueled the crisis. An Ambac unit was the world’s second-biggest bond insurer in 2008 when mounting defaults on mortgages swamped it with claims.
Ambac said Tuesday in a statement that the bank will pay $995m to end two lawsuits the New York-based insurer filed in New York state court in 2011 and 2012 over the quality of loans underlying mortgage bonds sold by Bear Stearns JPMorgan bought Bear Stearns in 2008.
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