3 banks confirm warnings from SEC

Jpmorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. are among banks warned by federal regulators that they may face civil claims tied to sales of mortgage-backed securities.

Jpmorgan said in a filing Wednesday that the Securities and Exchange Commission warned in January it may bring complaints stemming from two investigations into mortgage securitizations. Goldman Sachs and Wells Fargo also said Tuesday they received so-called Wells notices from the SEC, warning that agency staff may recommend enforcement.

“It’s a big deal given the level of anticipation that has been in the markets about whether there would be further actions,” said Jacob Frenkel, a former SEC lawyer now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Md. “These cases were complicated and time- consuming and the government has said for a long time that its investigations were continuing.”

The SEC has issued such notices to multiple banks in probes focusing on mortgage securities, said people with knowledge of the matter who asked not to be identified because the communications weren’t public.

Almost four years after mounting mortgage defaults prompted unprecedented government bailouts of the financial system, regulators are still examining how banks packaged and sold home loans to investors. The SEC is looking for evidence that firms failed to disclose underlying credit weaknesses in mortgage pools and delinquencies, Jason Anthony, special counsel for the agency’s structured products unit, said last week. He didn’t identify companies under scrutiny.

Jpmorgan said one inquiry focuses on due diligence and disclosures in two securitizations by a subsidiary. The other probe relates to “settlements of claims against originators” involving loans included in securitizations handled by Bear Stearns Cos., which Jpmorgan acquired in 2008, according to the filing.

Goldman Sachs got a Wells notice Friday relating to disclosures for a late-2006 offering of $1.3 billion in subprime residential mortgage-backed securities, the company said in an annual report. The New York-based firm said it “will be making a submission to, and intends to engage in a dialogue with, the SEC staff seeking to address their concerns.”

Goldman Sachs paid $550 million in 2010 to settle SEC claims that it misled investors on a mortgage-linked investment in 2007. In that case, the company said it made a “mistake” in omitting disclosures.

Wells Fargo, which revealed the SEC’S warning in an annual report yesterday, said the government has been examining whether it properly described facts and risks in offering documents.