UBS sued by U.S. regulator over sale of mortgage-backed securities
(Reuters) - A U.S. regulator has sued UBS, accusing the Swiss bank of violating federal and state laws through misrepresentations in the sale of mortgage-backed securities to two credit unions that later failed, according to a court filing.
The two unions, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp), paid more than $1.1 billion for the securities in 2006 and 2007, according to a complaint filed by the regulator, National Credit Union Administration (NCUA).
In the lawsuit filed in a Kansas court, NCUA said that at the time of purchase, U.S. Central and WesCorp "were not aware of the untrue statements or omissions of material facts" in the offering documents of the residential mortgage-backed securities (RMBS).
The misrepresentations in the offering documents had caused US Central and WesCorp to believe the risk of loss was minimal, when in fact the risk was substantial, NCUA said.
"The RMBS's substantial loss of market value has injured U.S. Central, WesCorp and the NCUA Board," the regulator said in the court papers. The agency has also asked the court for a jury trial in the case.
UBS spokeswoman Karina Byrne declined to comment to Reuters on the NCUA lawsuit.
NCUA has previously filed similar lawsuits against JP Morgan Chase, Royal Bank of Scotland Group, Goldman Sachs, and Wachovia, now a unit of Wells Fargo.
NCUA has settled claims worth more than $170 million with Citigroup, Deutsche Bank, and HSBC.
Corporate, or wholesale, credit unions provide services to retail credit unions including lending, as well as check and payment clearance services. Continued...