Two years after being sued by the Federal Housing Finance Agency for allegedly misrepresenting the quality of home loans backing private-label securities sold to Fannie Mae and Freddie Mac, UBS has agreed to a settlement.
FHFA sued the Swiss bank in 2011 over alleged violations of the Securities Act of 1933 in the sale of $4.5 billion in private-label residential mortgage-backed securities to Fannie and Freddie.
The RMBS sales took place between September 2005 and August 2007, according to the complaint, which was filed in federal court in Manhattan, N.Y.
“The lawsuit alleges that UBS Americas made numerous material misstatements and omissions about the mortgage loans underlying the private-label MBS, including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans,” FHFA said in a news release at the time. “The defendants also failed to conduct adequate due diligence.”
The lawsuit was just one of 18 actions filed by FHFA against financial institutions involved in RMBS sales to Fannie and Freddie.
On Monday, Zurich-based UBS announced that it has reached an agreement in principle to settle FHFA’s lawsuit.
“The settlement, which is subject to documentation and final approvals by the parties, would encompass pending RMBS-related litigation brought by the FHFA against UBS on behalf of Fannie Mae and Freddie Mac as well as certain unasserted claims,” UBS said in today’s statement. “The full cost of the settlement is covered by litigation provisions established by UBS during the second quarter of 2013 and in prior periods.”
