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FHFA seeking damages from UBS sales to GSEs
WASHINGTON (7/28/11)--The Federal Housing Finance Agency (FHFA) has brought a suit against UBS Americas in an attempt to recover losses and damages sustained by Fannie Mae and Freddie Mac. The two government-sponsored entities invested $4.5 billion in residential private-label mortgage-backed securities that were sold by UBS. The suit was brought in the federal district court for the Southern District of New York and names 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 as defendants. In the suit, the FHFA alleges that UBS “made numerous material misstatements and omissions about the mortgage loans underlying the private-label [securities], including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans.” The FHFA added that UBS “failed to conduct adequate due diligence.” FHFA Acting Director Edward DeMarco said that the FHFA’s suit is “consistent” with the FHFA’s responsibilities as conservator of Fannie and Freddie. The agency indicated that additional lawsuits could follow. The National Credit Union Administration (NCUA) has brought its own securities-related suits, seeking $1.5 billion in combined damages from RBS Securities and J.P. Morgan Securities, LLC. Similar to the FHFA, the NCUA has alleged that these securities firms materially misrepresented securities that were sold to corporate credit unions U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate. The NCUA has said that as many as seven additional court actions could be taken. For the FHFA’s statement and more on the NCUA’s recent actions, use the resource links.
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