UBS AG has wrapped up another lawsuit arising from its sales of mortgage-backed securities to credit unions that later failed.
The National Credit Union Administration said Monday that the Zurich-based bank paid $445 million to resolve claims alleging it misrepresented the quality of roughly $1.15 billion of residential MBS it sold to U.S. Central Federal Credit Union and Western Corporate Federal Credit Union in 2006 and 2007.
The NCUA made the claims in 2012 as liquidating agent for the credit unions. The recovery from UBS will go toward paying claims against U.S. Central and Western Corporate, including those of the Temporary Corporate Credit Union Stabilization Fund.
“This latest recovery, together with prior recoveries, has helped shield credit unions from greater Stabilization Fund assessments and provided a measure of accountability for the firms that sold faulty securities” to five corporate credit unions, NCUA Acting Board Chairman J. Mark McWatters said in a news release.
The NCUA’s total recoveries from those financial institutions have now reached nearly $4.8 billion. They also include the $79.3 million that UBS paid in April 2016 over losses sustained by Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union.
According to the NCUA, UBS falsely represented to U.S. Central and Western Corporate the loan-to-value ratios and underwriting guidelines of the mortgages underlying the RMBS. The mortgaged properties had been routinely overvalued and a significant percentage of borrowers were “all but certain” to rapidly default or fall behind in payments, the NCUA alleged.
U.S. Central and Western Corporate, once the two largest corporate credit unions in the U.S., were placed under NCUA conservatorship in 2009, largely due to their MBS-related losses.
The NCUA is still pursuing litigation against various residential mortgage-backed securities trustees and Libor banks. Other settlements have involved Goldman Sachs, Citigroup, Deutsche Bank, and HSBC Bank.