UBS Gets Some Reprieve As Judge Narrows $2B RMBS Case
Zacks Investment Research | Sep 06, 2016 09:39PM ET
UBS Group AG (NYSE:UBS) got some relief on Tuesday. A U.S. judge’s ruling narrowed down claims against the Swiss banking giant in a lawsuit related to $2 billion losses on residential mortgage-backed securities (RMBS) issued prior to the housing market meltdown. The lawsuit was brought against UBS Real Estate Securities Inc. by U.S. Bancorp (NYSE:USB) , on behalf of three trusts established for RMBS.
U.S. District Judge Kevin Castel stated that U.S. Bancorp has failed to show that UBS was intentionally ignorant toward deficiencies in many of the loans. Castel mentioned in his ruling, "The trusts have not proved that UBS took deliberate actions to avoid knowledge that widespread breaches had occurred throughout the loans held by the trusts, thereby triggering UBS's repurchase obligations."
The case centers on thousands of loans that UBS had acquired and later pooled into three trusts which issued securities, allowing investors to payments made by borrowers. The U .S. Bank, as trustee of the three trusts, alleged that UBS breached certain representations and warranties tied with 9,342 of the 17,082 mortgage loans that were pooled in the trusts. The plaintiffs sought more than $2 billion in damages.
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