FHFA Pursues Swiss Bank UBS for Bad Mortgage-backed Securities
Empowered by Congress to pursue those responsible for the Mortgage Crisis, by collecting debts due to government-sponsored mortgage companies Freddie Mac and Fannie Mae, the Federal Housing Finance Agency has followed the money trail to Switzerland's UBS, the country's biggest lender.
The FHFA is suing the bank over $6.4 billion in low-quality mortgage-backed securities that the agency believes the bank sold knowingly. The U.S. Court of Appeals has ruled that the United Bank of Switzerland will not be able to slip the suit by claiming that it was filed too late.
The Court pointed out that the Housing and Economic Recovery Act of 2008 extended the statute of limitations specifically to give the new FHFA the necessary time to organize and conduct a thorough, in-depth investigation.
The case is one of 17 being pursued by the FHFA regarding over $200 billion in mortgage-backed securities. 15 of those cases will be presided over by the district judge who dismissed UBS's appeal. All 15 of the banks involved in those cases have filed separate rulings against U.S. District Judge Denise Cote for allegedly making grossly prejudiced pretrial rulings that have created an erroneous and biased framework for litigation.
The Securities Industry and Financial Markets Association argued that the Court should not be interpreting the letter of the law, as it creates confusion for institutions to comply.
In a short response, the Justice Department backed Cote's decision.
Other defendants in the FHFA's slew of lawsuits Barclays PLC, Citigroup, and Bank of America Corporation, who seemingly came out from under the Federal Government's spotlight.
Certainly these institutions who have taken a beating since the market fall won't be giving up billions of dollars without a fight. This litigation process will be complex, with a paper trail of millions of loans being sold and traded across the world. It will certainly take months, if not several years for the entire situation to play out. Stay tuned.
By: Javi Calderon
