New York Attorney General sues JPMorgan for alleged mortgage securities fraud

New York Attorney General Eric Schneiderman on Monday filed a lawsuit against JPMorgan Chase for alleged fraud relating to mortgage-backed securities, a type of investment that consists of mortgage loans that have been pooled together.

The case is the first brought by a White House task force called the Residential Mortgage-Backed Securities Working Group against a major bank. President Barack Obama formed the group in January to investigate fraud in the mortgage-backed securities market.

The task force alleged that the bank “kept investors in the dark” regarding the quality of the loans it packaged into mortgage-backed securities. The bank failed to disclose problems with the mortgage-backed securities with its investors, such as the fact that the loans had been made to borrowers who “were highly likely to default,” according to the lawsuit.

The crash of the mortgage-backed securities has been blamed for the global financial crisis of 2008.