WASHINGTON/NEW YORK (Reuters) – JPMorgan Chase & Co said it agreed to pay $153.6 million to settle U.S. Securities and Exchange Commission charges that it misled investors about a mortgage securities transaction just as the nation’s housing market was starting to plummet.

The SEC also filed civil charges against Edward Steffelin, a principal at GSC Capital Corp, accusing him of drafting misleading marketing materials for the transaction that failed to reveal that the Magnetar Capital LLC hedge fund helped choose and bet against the underlying securities.

Tuesday’s announcement came less than a year after Goldman Sachs Group Inc agreed to pay $550 million to settle SEC charges that it did not tell investors in the Abacus CDO that hedge fund investor John Paulson helped choose the underlying securities and bet against them.

According to the SEC, JPMorgan in 2007 structured a collateralized debt obligation, Squared CDO 2007-1, mainly with credit default swaps tied to other CDO securities whose value was tied to the nation’s housing market.

It said the Squared CDO’s marketing materials said the underlying investments were chosen by a GSC affiliate. But in fact, Magnetar played a significant role and would benefit from defaults because of a nearly $600 million short position, it said.

In a conference call, SEC enforcement chief Robert Khuzami said he did not anticipate the agency bringing charges against any JPMorgan executives in connection with the CDO case.

JPMorgan did not admit wrongdoing in agreeing to settle. In a statement, it said it also made payments of about $56 million to investors in a separate CDO, Tahoma I.

Alex Lipman, a lawyer for Steffelin, criticized the SEC’s actions involving his client.

“We are baffled by the SEC’s decision to proceed against an individual in a contested proceeding on a negligence theory, especially in a case where Mr. Steffelin did not work for the underwriter and had no responsibility for the contents of the offering memorandum,” Lipman said in an interview.

(Reporting by Sarah N. Lynch and Jonathan Stempel, editing by Gerald E. McCormick and John Wallace)

ALBANY, N.Y. – New York Attorney General Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis that fueled the recession, an official familiar with the issue said Tuesday.

Schneiderman is meeting with representatives of the Bank of America, Morgan Stanley and Goldman Sachs, according to the official, who spoke to The Associated Press on condition of anonymity. Those meetings are expected to focus on mortgage securities operations during the boom on Wall Street that ultimately cost banks billions of dollars.

The official said securitization of those mortgages would be an area Schneiderman will examine. Packaging mortgages into securities that investors could buy might have concealed risky loans, something critics on Wall Street said was at the center of the mortgage crisis.

The official spoke on the condition of anonymity because of the sensitivity of the continuing investigation.

There was no immediate comment from the banks.

There also was no immediate response to messages left at Schneiderman’s offices about the records search, which was first reported by The New York Times and the Wall Street Journal.

The official told the AP that the records search is part of Schneiderman’s review of factors that led to the 2008 financial crisis.

Back then, banks sold bundles of risky mortgages with teaser rates that increased after only a few years. Many borrowers ended up defaulting on the loans when the interest rates spiked. As a result, the value of mortgage securities plummeted.

Experts in the area have since said that banks had very little of their own money invested in those mortgages. That led banks to take greater risks, which contributed to the fiscal crisis.

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Associated Press Business Writer Pallavi Gogoi contributed to this report from New York City.

(Reuters) – Settlement agreements being hammered out by securities regulators and securities firms accused of fraud in mortgage bond deals are likely to include civil charges against at least one person connected to each deal, the Wall Street Journal said, citing people familiar with the matter.

SEC officials are pushing hard as part of their ongoing probe of collateralized debt obligations and other mortgage related products developed by Wall Street to bring charges against individuals, such as executives involved in selling the deals or outsiders who managed the assets, the Journal said.

The agency may also file civil charges against hedge fund managers who helped structure certain mortgage bond deals but then bet against them, the paper said.

The SEC could not immediately be reached for comment outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)

(Reuters) – The securities regulator is in talks with major Wall Street banks to settle fraud allegations relating to the sale of toxic mortgage bonds to various investors that helped unleash the financial crisis, the Wall Street Journal reported, citing sources familiar with the matter.

The first settlement with the Securities and Exchange Commission (SEC) could be reached as soon as next week, while some of the other deals could take months to work out, the WSJ said.

SEC’s negotiations with the banks include JPMorgan Chase, Citigroup Inc, Morgan Stanley, Merrill Lynch, now an unit of Bank of America, and UBS, according to the Journal.

The SEC hopes to reach a series of settlements with individual banks over the sales of mortgage bonds, rather than a big industry wide deal, the Journal said, citing people familiar with the matter.

The regulator’s decision to go for individual settlements reflects substantial differences in the nature of the civil fraud allegations faced by each bank, the sources told the Journal.

All of the banks named in the report and the SEC declined to comment to WSJ.

Spokesmen for JPMorgan and Bank of America Merrill Lynch declined to comment on the Journal report to Reuters . All other parties could not immediately be reached for comment outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Dhara Ranasinghe)