UBS agrees US$885m deal for subprime lawsuit

PUBLISHED : Saturday, 27 July, 2013, 12:00am
UPDATED : Saturday, 27 July, 2013, 5:05am

UBS, Switzerland's largest bank, has agreed to pay US$885 million to Fannie Mae and Freddie Mac to settle claims that it improperly sold them mortgage-backed securities during the housing bubble, a US regulator said.

The Federal Housing Finance Agency claimed Zurich-based UBS misrepresented the quality of loans underlying billions of dollars in residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac. They have been under US conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them towards insolvency.

UBS disclosed this week that it had reached an agreement in principle to settle the suit.

"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," said the agency's acting director, Edward DeMarco.

The agency sued UBS and 17 other banks in 2011, seeking to recover losses on a total of US$200 billion in mortgage-backed securities sold to the two bodies.

UBS is the third bank to reach an agreement with the agency. Citigroup and General Electric have both paid undisclosed amounts to settle claims.