Wells Fargo sues JPMorgan over 800 mortgage loans

In an effort to recoup losses from the purchase of more than 800 sour mortgage loans, Wells Fargo recently sued JPMorgan Chase demanding the lender buy back the faulty loans. Wells Fargo claims JPMorgan's EMC Mortgage unit approved mortgage loans that had clear defects in their applications such as faulty appraisals and inflated borrower incomes.

EMC, acquired by JPMorgan when the bank bought Bear Stearns in 2008, is also accused of breaching representations and warranties on 89 percent of mortgage loans, Reuters reported. After filing suit against Bank of America for similar charges, Wells Fargo and other banks have decided to take action against other lenders alleged to have misrepresented the quality of mortgage-backed securities.

According to Housing Wire, Wells Fargo said EMC did not meet contractual obligations or underwriting standards on the sale of the loans, and the mortgage lender has rejected the repurchase demands of Wells Fargo which violates its contract.

According to the claim, 930 of the loans sold to Wells Fargo were refinances on existing mortgages that based the value of the property on the appraised value not the sale price. Wells Fargo argues 110 of the refinanced properties were sold at prices well below what appraisers valued them at prior, the news source reported.

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