Reuters: Regulatory News: UPDATE 1-UBS loses bid to dismiss FHFA mortgage debt case

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UPDATE 1-UBS loses bid to dismiss FHFA mortgage debt case May 4th 2012, 18:53 Fri May 4, 2012 2:53pm EDT * Fannie Mae, Freddie Mac said to lose money on mortgage debt * Judge refuses to dismiss securities law claims * Judge dismisses negligent misrepresentation claims * Lawsuit one of 17 brought by FHFA May 4 (Reuters) - A U.S. judge rejected UBS AG's bid to dismiss a federal regulator's lawsuit accusing it of misleading Fannie Mae and Freddie Mac into buying billions of dollars of risky mortgage debt. The case is one of 17 brought last year against various banks by the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac. Friday's decision by U.S. District Judge Denise Cote in Manhattan is the first to consider a motion to dismiss. According to the complaint, Fannie Mae and Freddie Mac have lost in excess of $1.1 billion by investing in more than $6.4 billion of residential mortgage-backed securities that UBS sold in 22 securitizations form September 2005 to August 2007. The complaint said UBS failed to perform adequate due diligence, and hid or misstated the quality of the underwriting and the ability of borrowers to make payments. In her decision, Cote denied the Swiss bank's motion to dismiss the FHFA's securities law claims, saying the regulator plausibly alleged that mortgage originators had "serially deviated" from their underwriting standards. Cote did grant UBS' motion to dismiss the FHFA's negligent misrepresentation claims. UBS spokesman Christiaan Brakman declined to comment. Stefanie Johnson, an FHFA spokeswoman, said the FHFA is pleased with the decision and will continue to press its case, "which is important to the enterprises and taxpayers." The case is Federal Housing Finance Agency v. UBS Americas Inc et al, U.S. District Court, Southern District of New York, No. 11-05201. Link this Share this Digg this Email Reprints

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