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Fannie and Freddie

Settlement confirmed for UBS

Fannie Mae was one of the two major mortgage companies affected by bond issues (Keystone)

Fannie Mae was one of the two major mortgage companies affected by bond issues


UBS will pay $885 million (CHF822 million) to settle United States government claims that it violated securities laws in its sales of mortgage-backed bonds between 2004 and 2007 to two federally-controlled mortgage finance companies.

The Federal Housing Finance Agency (FHFA), which oversees the two companies known as Fannie Mae and Freddie Mac, announced the settlement Thursday.

The agency had sued UBS and 17 other major banks over their sales to Fannie and Freddie of about $196 billion in mortgage securities that soured when the housing market collapsed in 2007.

The banks were accused of misrepresenting the quality of the mortgages packaged into the securities. In the UBS case, the bonds were valued at more than $4.5 billion.

“The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” said Edward DeMarco, the FHFA’s acting director.

UBS will pay about $415 million to Fannie and $470 million to Freddie. The Swiss banking giant did not admit to any liability or wrongdoing in settling the allegations. On Monday, it had already announced it had reached an agreement in principle with the agency.

"As we disclosed earlier this week, UBS was fully provisioned for this settlement, which was in the best interests of our clients and shareholders," UBS spokeswoman Karina Byrne told the Wall Street Journal.

The FHFA, which hopes to eventually recover billions of dollars, said the deal means it has now reached settlements with three of the 18 banks it sued.

The agency previously settled with Citigroup and GE Capital, although details of those settlements were not released. The others include Bank of America and JPMorgan Chase.

Fannie Mae and Freddie Mac were seized by the US government in 2008 as the housing crisis threatened their solvency. They have received $187.5 billion in taxpayer funds to stay afloat.

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