J.P. Morgan Chase, through its subsidiaries, may have misrepresented the risk profile of mortgage pass-through certificates issued to investors.

This is a securities class action against J.P. Morgan Acceptance Corporation a wholly owned subsidiary of JPMorgan Chase.

The securities class action lawsuit alleges that J.P. Morgan issued false and misleading Registration Statements and Prospectus Supplements in connection with the issuance of billions of dollars of Mortgage Pass-Through Certificates. The Certificates included several classes or trenches, which had various priorities of payment, exposure to default, interest payment provisions and/or levels of seniority. These Certificates were supported by large pools of mortgage loans.

The Registration Statements represented that the mortgage pools would primarily consist of loan groups generally secured by first liens on residential properties, including conventional, adjustable rate and negative amortization mortgage loans. The securities class action complaint states that investors purchased the Certificates based upon two primary factors: return (in the form of interest payments), including timing of principal and interest payments, and safety (risk of default of the underlying mortgage loan assets). The Registration Statements discussed the underwriting standards purportedly used in connection with the underwriting of the underlying mortgage loans and included numerous representations about the loan-to-value ratios used to qualify borrowers, the appraisals of properties underlying the mortgages and the maximum debt-to-income ratios permitted on the mortgage loans.

The class action lawsuit alleges that Registration Statements omitted and/or misrepresented the fact that the sellers of the underlying mortgages to JP Morgan were issuing many of the mortgage loans to borrowers who:

(i) did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender;

(ii) did not provide adequate documentation to support the income and assets required for the lenders to approve and fund the mortgage loans pursuant to the lenders' own guidelines;

(iii) were steered to stated income, asset and low documentation mortgage loans by lenders, lenders' correspondents or lenders' agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation; and

(iv) did not have the income required by the lenders' own guidelines to afford the required mortgage payments which resulted in a mismatch between the amount loaned to the borrower and the capacity of the borrower.

The Registration Statements failed to disclose that the lenders or the lenders' agents knew that the borrowers either could not provide the required documentation or refused to provide it. Finally, the complaint alleges that the Registration Statements did not disclose that the underwriting, quality control and due diligence practices utilized in connection with the approval and funding of the mortgage loans were so weak that some borrowers were given mortgage loans based on stated income in the loan applications with purported income amounts that could not possibly be reconciled with the jobs claimed on the loan application or through a check of free "online" salary databases.

As a result of these alleged misstatements and omissions, the Certificates sold to plaintiffs and the Class were secured by assets that had a much greater risk profile in the form of a statistically significant difference between the expected versus actual performance of such assets than represented in the Registration Statements, and defendants offered superior credit ratings on the Certificates as a result of defendants' failure to disclose the underwriting defects and appraisal manipulations.