(Tiper Stock Exchange) – UBS extension has reached a agreement with the US Department of Justice (DOJ) to resolve a legacy issue from 2006-2007, relating to the issuance, underwriting, and sale of residential mortgage-backed securities (RMB extension). Under the terms of the agreement, UBS will pay $1.435 billion to resolve all civil disputes brought by the Department of Justice relating to the business. The transaction was “entirely provisioned” in previous periods, the Swiss bank points out.
This transaction, highlights the DOJ, solves the last case led by a Justice Department working group dedicated to investigating the conduct of banks and other entities for their roles in the creation and issuance of RMB extension which led to the 2008 financial crisis.
US authorities said that, contrary to UBS’s statements in publicly filed offering documents, UBS knew that a significant number of RMBS collateral loans were non-compliant to loan underwriting guidelines designed to assess the repayment capacity of borrowers. Additionally, UBS was aware that the property values associated with a significant number of the securitized loans were unbacked and that a significant number of the loans had not been originated in compliance with consumer protection laws. UBS was presumably aware of these significant issues because it had conducted extensive due diligence on the underlying loans prior to the issuance of the RMBS to determine whether the loans were consistent with disclosures that would be made to investors. In the end, the 40 RMBS suffered substantial losses.
With the UBS settlement announced today, the Justice Department has raised more than $36 billion in civil penalties by companies for their alleged conduct in connection with failed RMBS securitized mortgages leading up to the 2008 financial crisis. These resolutions include settlements with the following banks, mortgage institutions and rating agencies: Ally Financial; Aurora Loan Services; Bank of America; Barclays; citigroup; Credit Suisse; Deutsche Bank; General Electric; Goldman Sachs; HSBC extension; JPMorgan; Moody’s; Morgan Stanley; Nomura; Royal Bank of Scotland; S&P; Societe Generale; Wells Fargo.