UBS, which has already paid out hundreds of millions of dollars over its pre-crisis mortgage securitization activities, is about to be facing another massive lawsuit for the same conduct.
UBS revealed late Wednesday that it is expecting to be sued by the Department of Justice over its issuance, underwriting and sale of residential mortgage-backed securities from 2006 to 2007.
According to UBS, the DOJ could file a lawsuit against the company as soon as this week, which will seek unspecified monetary civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act.
UBS claims that the DOJ’s pending allegations are “not supported by the facts or the law,” and states that it plans to “vigorously” fight any charges brought by the DOJ.
“UBS is confident in its legal position and has been fully prepared for some time to defend itself in court,” the company said in a statement.
“UBS was not a significant originator of U.S. residential mortgages and suffered massive losses on its investments in U.S. mortgage-related assets when the U.S. housing market collapsed,” the company continued. “This fact alone negates any inference that UBS engaged in an intentional fraud.”
The company claims that it fulfilled its disclosure obligations to mortgage bond investors and states that it believes that FIRREA “limits any penalty that the DOJ may seek to obtain to losses incurred by federally insured financial institutions, which were a fraction of the overall losses on RMBS certificates sold by UBS.”
While that assertion will likely be left to court to determine (if the lawsuit even gets that far), UBS previously settled a number of lawsuits over its pre-crisis mortgage bond activities.
In the last few years, the company paid out more than $500 million to the National Credit Union Administration, on behalf of several failed credit unions, over failed mortgage bonds.
And earlier this year, UBS reached a $230 million settlement with the state of New York over the mortgage bonds it sold to investors in 2006 and 2007.
Under the terms of that settlement, UBS will provide $189 million worth of consumer relief for New York homeowners and communities and $41 million in cash to New York itself.
And now, the company could be facing another lawsuit over its legacy activities as soon as this week.
