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FHFA Sues UBS Americas Over MBS Losses

On Wednesday the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA) slapped ""UBS Americas Inc."":http://www.ubs.com/1/e/media_overview/media_global/contactinformation/americas.html and several other defendants with a ""suit"":http://www.fhfa.gov/webfiles/21841/FHFAvUBSstamped.pdf in the U.S. district court for the Southern District of New York, claiming the company violated federal law by selling bad residential private-label mortgage-backed securities to GSEs ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/.


""FHFA is taking this action consistent with our responsibilities as conservator of each Enterprise,"" Edward J. DeMarco, FHFA acting director, said in a statement. ""From the issuance of 64 subpoenas last year to the filing of this lawsuit and further actions to come, we continue to seek redress for the losses suffered by the Enterprises.""


Aiming to recover losses stemming from a $4.5 billion investment by the GSEs in 16 pools of mortgage-backed securities, the federal agency alleges in the suit that UBS misstated and omitted important details about borrower creditworthiness, origination quality, and evaluative criteria for loans.

The FHFA asserted authority to sue on behalf of the GSEs as their conservator, citing the 2008 Housing and Economic Recovery Act.

""We are reviewing today's complaint and intend to defend ourselves vigorously against it in court,"" Emma Stradling, a UBS spokesperson, tells _MReport_.

In the suit, the FHFA said that UBS ""falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the borrowers' capacity to repay their mortgage loans├â┬ó├óÔÇÜ┬¼├é┬ª As a result,"" it said, ""Fannie Mae and Freddie Mac have suffered substantial losses as the value of their holdings has significantly deteriorated.""

Other defendants mentioned by the suit include UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions, Inc., and four ex-UBS senior executives, including Hugh Corcoran, Per Dyrvick, David Martin, and Peter Slagowitz. The suit alleges that the four executives signed off on certificates related to the mortgage-backed securities.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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