Wells Fargo Sues JP Morgan Over $481M CMBS Loan Originated in 2019

Wells Fargo (WFC), acting as the commercial mortgage-backed securities (CMBS) trustee, filed suit against J.P. Morgan Chase in federal court Monday alleging false financial statements that resulted in investor losses for a $481 million loan issued in 2019.

The complaint, which was filed in the U.S. District Court for the Southern District of New York by Wells Fargo as a CMBS trustee through special servicer Situs Holdings, alleges that J.P. Morgan was aware of “dramatically inflated” financial information when it originated the loan six years ago for Chetrit Group’s acquisition of 43 multifamily assets.

Wells Fargo, the investors’ trustee for the single-borrower JPMCC 2019-MFP CMBS deal, claims in the lawsuit that Chetrit “massively overstated” historical net operating income (NOI) figures for the properties by 25 percent. The complaint claims that instead of demanding corrected NOI data, J.P. Morgan proceeded with the loan. The borrower eventually defaulted in 2022 and still owes $285 million.

“The remaining properties that serve as collateral for the mortgage loan are worth far less than that outstanding amount,” the lawsuit states.  

Wells Fargo is asking the court to require J.P. Morgan to repurchase the loan at the repurchase price or pay damages for breach of its contract.

Wells Fargo and Chetit Group did not immediately return requests for comment. J.P. Morgan declined to comment. 

Andrew Coen can be reached at acoen@commercialobserver.com