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Remember the housing crash? It just cost UBS $1.4B

Swiss bank settles fraud, misconduct case from 2000s disaster

UBS Penalized $1.4B Pertaining to Global Financial Crisis
Attorney General Merrick Garland and UBS' Sergio Ermotti (Getty)

Swiss bank UBS settled the last of the lingering cases brought by the Department of Justice against large financial institutions after the global financial crisis.

UBS agreed to pay $1.4 billion in civil penalties pertaining to alleged fraud and misconduct in its residential mortgage-backed securities offering predating the 2008 crisis, CNBC reported. The Justice Department has now recovered $36 billion.

Between 2005 and 2007, UBS originated $1.5 billion in residential mortgages that were bundled into securities and sold to investors. The Justice Department alleged UBS was aware the mortgages backing its RMBS products were not of the quality suggested to buyers and ignored underwriting standards.

Prosecutors alleged UBS conducted “extensive” research on the underlying loans and knew of their problems, but kept selling them to reap the financial rewards.

A decade ago, the bank settled a similar case regarding claims by Freddie Mac and Fannie Mae. UBS agreed to pay the entities $885 million to resolve accusations that it had sold them defective RMBS products during the housing bubble.

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That settlement came two years after the Federal Housing Financial Agency, acting on behalf of the two entities, sued UBS over $4.5 billion in RMBS products sponsored by the bank and $1.8 billion in securities sold to Fannie and Freddie. The lawsuits claimed misrepresentations caused at least $1.2 billion in losses.

A dozen-and-a-half of the world’s largest financial institutions — including Bank of America, Citigroup, Goldman Sachs and Wells Fargo — were probed over the RMBS activity leading into the 2008 global financial crisis and subsequent recession.

In 2016, Morgan Stanley agreed to pay $3.2 billion to settle a federal and state investigation into its RMBS activities, earmarking $550 million for the state of New York. As part of the settlement, the institution acknowledged that it relaxed standards for the mortgage loans it pooled and sold to investors without making buyers aware of that.

— Holden Walter-Warner

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Department Of JusticeGreat RecessionHousing BubbleMortgagesRmbsUBS