Two Wall Street firms, JPMorgan Securities LLC and Credit Suisse Securities (USA), have settled with U.S. securities regulators over allegations that they misled investors in offerings of residential mortgage-backed securities (RMBS).

The firms agreed to settlements with the US Securities and Exchange Commission (SEC), without admitting or denying the allegations, which will see them pay more than US$400 million combined. The SEC says that it intends to distribute the funds to investors.

JPMorgan has agreed to pay almost $300 million to settle the SEC’s charges that it misstated information about the delinquency status of mortgage loans that provided collateral for an RMBS offering in which it was the underwriter. The SEC says that the firm received fees of more than $2.7 million, and investors sustained losses of at least $37 million on the undisclosed delinquent loans.

The SEC also charged JPMorgan for Bear Stearns’ failure to disclose its practice of obtaining and keeping cash settlements from mortgage loan originators on problem loans that it had sold into RMBS trusts. The proceeds from this bulk settlement practice were at least $137.8 million. JPMorgan has agreed to pay $296.9 million to settle the SEC’s charges.

According to the SEC’s order against Credit Suisse, the firm also failed to accurately disclose its practice of retaining cash for itself from the settlement of claims against mortgage loan originators for problems with loans that Credit Suisse had sold into RMBS trusts and no longer owned. It says Credit Suisse also made misstatements in SEC filings about when it would repurchase mortgage loans from trusts if borrowers missed the first payment due.

The SEC says that the firm made $55.7 million in profits and losses avoided from its bulk settlement practice, and its investors lost more than $10 million due to Credit Suisse’s practices concerning first payment defaults. Credit Suisse has agreed to pay $120 million to settle the SEC’s charges.

“In many ways, mortgage products such as RMBS were ground zero in the financial crisis,” said Robert Khuzami, director of the SEC’s division of enforcement. “Misrepresentations in connection with the creation and sale of mortgage securities contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed. Today’s actions involving RMBS securities are a continuation of the SEC’s strong efforts to pursue wrongdoing committed in connection with the financial crisis.”