UBS is paying $1.44 billion to settle the Justice Department’s subprime lending fraud allegations
UBS agreed to pay $1.435 billion to settle US allegations that the Swiss lender misled investors into buying distressed mortgage securities, closing an industry-wide probe into a root cause of the 2008 global financial crisis.
The Justice Department announced Monday that it had collected more than $36 billion in civil fines from 19 banks, mortgage lenders and rating agencies for packaging, selling and grading securities backed by residential property in the run-up to the crisis.
Many of these securities were triple-A rated despite being backed by subprime and other risky mortgages, and investors suffered huge losses as borrowers defaulted and underwriting flaws became apparent.
The largest $16.65 billion deal was reached in 2014 with Bank of America, which had bought mortgage specialist Countrywide Financial six years earlier.
The UBS settlement settled allegations by the Justice Department in a 2018 lawsuit filed in Brooklyn that the bank had defrauded investors by knowingly making false and misleading claims about more than $41 billion in loans, the 40 RMBS from the years 2006 and 2007 secured.
The bank turned down a proposal to pay nearly $2 billion for the settlement, a person familiar with the matter said at the time.
Credit Suisse, which bought UBS in June, achieved a similar result Settled over $5.28 billion in 2017.
In a press release, UBS said it had previously set aside reserves to cover the $1.43 billion payout. Monday’s settlement should see the lawsuit dismissed.
UBS’s payout is “a warning to other players in the financial markets who seek illegitimate profits through fraud that we will hold them accountable no matter how long it takes,” US Attorney Breon Peace said in a statement in Brooklyn.
