UBS to pay $885M to end Fannie, Freddie RMBS case

Swiss bank UBS will pay Fannie Mae and Freddie Mac $885 million to settle claims that it had misleadingly sold them defective residential mortgage-backed securities during the housing bubble, Bloomberg News reported. Earlier this week, UBS had agreed to the settlement, but the amount was not disclosed at the time.

The Federal Housing Finance Agency claimed UBS misrepresented the quality of loans underlying billions of dollars in RMBS that Fannie and Freddie bought in the years leading up to the financial crisis.

In 2011, FHFA sued UBS over $4.5 billion in RMBS sponsored by the bank and $1.8 billion in securities that UBS sold to Fannie and Freddie. The suits claimed that the misrepresentation caused at least $1.2 billion, plus interest, in losses.

“The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” FHFA’s acting director Edward DeMarco said in a statement to Bloomberg.

“UBS was fully provisioned for this settlement, which was in the best interests of our clients and shareholders,” Karina Byrne, a spokesperson for UBS Americas, told Bloomberg. [Bloomberg News] – Hiten Samtani