JPMorgan Chase has filed suit against the Federal Deposit Insurance Corporation in the federal court in Washington, alleging that the agency, which is acting as receiver for now-defunct AmTrust Bank, improperly denied JPMorgan’s effort to recoup losses it suffered when AmTrust went under.
In its Aug. 13 complaint, JPMorgan says it had a contract with AmTrust that required AmTrust to repurchase mortgage loans that had been sold to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) if either Fannie Mae or Freddie Mac ordered JPMorgan, which serviced the loans, to repurchase them.
According to the complaint, filed by Joel Cohen, a New York-based partner at Davis Polk & Wardwell, the Office of Thrift Supervision closed AmTrust on Dec. 4, 2009 and appointed the FDIC to act as receiver for the Ohio-based bank. At the time of AmTrust’s closing, JPMorgan contends, there were a number of mortgage transactions that were still in limbo.
JPMorgan filed a claim seeking to recover from those transactions on March 5. The claim said it was “not capable of being determined with certitude” the amount of the losses, but it provided an estimate. The complaint does not disclose the estimated amount of the alleged damages.
On June 14, the FDIC denied the claim, saying that JPMorgan “did not provide sufficient proof.” JPMorgan argues in the complaint that despite receiving a six-month extension to issue a decision, “FDIC-Receiver rendered a final decision without giving [JPMorgan] notice of the purported inadequacy of proof, or an opportunity to address any inadequacy of proof.” The complaint also says that the FDIC’s notice provided no explanation as to how the claim provided insufficient proof.
The complaint alleges breach of contract and asks that a determination be made as to the adequacy of JPMorgan’s claim and that the denial of the claim be declared void.
Cohen did not immediately return calls for comment.