NEW YORK CITY—New York State Attorney General Eric T. Schneiderman reports that UBS has agreed to a $230-million settlement in connection with the lender's packaging, marketing and issuance of residential mortgage-backed securities to investors prior to the housing crisis in 2006.

The settlement announced on Wednesday includes UBS paying $189 million in consumer relief for New York homeowners and communities and $41 million in cash to New York State.

The case stems from RMBS issued by UBS in 2006 and 2007 that were backed by mortgage loans based on “inaccurate statements in prospectus supplements and/or investor presentations for the RMBS.” The AG charges that many of the mortgage loans did not comply with underwriting guidelines or applicable laws and regulations.

“The loan pools backing the securitizations suffered billions of dollars of collateral losses, causing investors to experience shortfalls in principal and interest payments, as well as declines in the market value of their certificates,” the attorney general states in a press announcement of the settlement agreement.

“Years later, New Yorkers are still recovering from the housing crash, as communities grapple with the effects of plummeting home values, vacant properties, and an affordable housing crisis,” Attorney General Schneiderman adds. “Today's settlement marks another key step forward as New Yorkers rebuild their lives and communities. The dollars we've secured have funded critical housing programs across New York—and this settlement means even more community revitalization work in the years to come.”

The attorney general notes that in 2006 and 2007, UBS's diligence vendors determined that loans sold by the loan originators to UBS did not conform to underwriting guidelines, yet UBS packaged and sold them anyway. UBS also admitted that it securitized some loans where no diligence was performed to assess whether the loans conformed to underwriting guidelines or had other defects.

“Further, UBS's review of securitized mortgage loans, which defaulted shortly after issuance, showed serious problems in the origination of the loans. Nevertheless, even after identifying these problems, UBS continued to purchase and securitize risky loans from the same originators,” the attorney general charges.

UBS is the seventh large financial institution to settle with New York State since the attorney general was appointed co-chair of the RMBS Working Group by President Obama in 2012. Attorney General Schneiderman has secured $3.93 billion in cash and consumer relief for New Yorkers in the aftermath of the residential mortgage crisis. When combined with the National Mortgage Settlement, the total value rises to $6.06 billion.

Instant Insights /

UBS Agrees to Pay $230M to NY State in RMBS Loan Case

Related Stories

Recommended For You