FHFA Sues UBS for Sales of MBS to GSEs

The Federal Housing Finance Agency (FHFA), the conservator of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, has filed a lawsuit in the federal district court for the Southern District of New York against UBS Americas Inc., and related defendants, alleging violations of federal securities laws in the sale of residential private label mortgage-backed securities (MBS) to the GSEs. FHFA seeks to recover losses and damages sustained by the GSEs as a result of their investments in UBS Securities. 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. The defendants also failed to conduct adequate due diligence. The suit seeks to recoup the losses suffered by the GSEs related to their $4.5 billion investment in securities sold by UBS. As conservator of the GSEs, FHFA is charged with preserving and conserving their assets. Through this lawsuit and additional suits expected to follow, FHFA seeks to recover losses suffered by the GSEs in connection with their investments in private-label securities. “FHFA is taking this action consistent with our responsibilities as conservator of each enterprise,” said Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco. “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.” The defendants named in the lawsuit are UBS Americas Inc., UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions Inc., and former UBS executives David Martin, Per Dyrvick, Hugh Corcoran and Peter Slagowitz.