WMC Mortgage was sued by the securities administrator for a mortgage trust, which accused the subprime loan originator of breach of contract that caused more than $550 million in damages.
The trust was formed as part of a $1.9 billion residential mortgage securitization sponsored by JP Morgan Mortgage Acquisition Corp. and serviced by JPMorgan Chase (JPM), according to the suit, filed Thursday in New York State Supreme Court in Manhattan.
The suit was filed by Bank of New York Mellon (BK) in its capacity as securities administrator of the trust, according to court filings. WMC Mortgage was bought by a unit of General Electric Capital (GE) in 2004 and operated as its mortgage lending arm until it was sold in 2007.
A review of the trust revealed more than 3,000 mortgages with "material and adverse" breaches of information regarding characteristics of the loans, including misrepresentations as to the occupancy of the owner, according to the suit.
Defects included "repeated failure to adhere to sound underwriting practices, a blatant disregard for a borrower's ability to repay the loan, and intentional ignorance of warning signs of fraud," according to the suit.
Russell Wilkerson, a spokesman for General Electric Capital, didn't immediately respond to a telephone message and an e-mail seeking comment on the suit. Justin Perras, a spokesman for JPMorgan Chase, declined to comment on the suit in an e-mail.
The case is JPMorgan Mortgage Acquisition Trust, Series 2006-WMC4, by the Bank of New York Mellon, solely in its capacity as the securities administrator, v. WMC Mortgage LLC, 654464/2012, New York State Supreme Court, New York County (Manhattan).