UBS fails to dismiss US mortgage suit

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New York - UBS AG’s bid for dismissal of a Federal Housing Finance Agency lawsuit was denied by an appeals court, sending toward trial claims the bank misrepresented the quality of loans tied to $6.4 billion in mortgage securities.

UBS, Switzerland’s largest lender, alleged that the suit was filed too late under federal law.

The US Court of Appeals in Manhattan ruled today that the Housing and Economic Recovery Act of 2008 extended the filing period for such suits.

US District Judge Denise Cote in Manhattan ruled in May that UBS must face securities-law claims in the suit.

“As HERA makes clear, Congress intended FHFA to take action to collect all obligations and money due” to government- sponsored Fannie Mae and Freddie Mac, the judges said in their opinion.

“Congress obviously realised that it would take time for this new agency to mobilise and to consider whether it wished to bring any claims.”

FHFA alleged that Zurich-based UBS misrepresented the quality of loans underlying $6.4 billion in residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac, according to the opinion.

FHFA was appointed conservator of the mortgage financiers in 2008.

The case is Federal Housing Finance Agency v. UBS Americas Inc., 12-03207, US Court of Appeals for the Second Circuit (Manhattan). - Bloomberg News

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