* 2nd Circuit says FHFA has standing, did not sue too late
* UBS said to have sold toxic mortgages to Fannie, Freddie
By Bernard Vaughan
NEW YORK, April 5 A federal appeals court
rejected UBS AG's bid to dismiss a U.S. regulator's
lawsuit seeking to hold the Swiss bank responsible for losses on
mortgage securities at Fannie Mae and Freddie Mac
The 2nd U.S. Circuit Court of Appeals said the Federal
Housing Finance Agency did not wait too long to sue UBS over the
$6.4 billion of mortgage securities that Fannie Mae and Freddie
Mac bought. It also rejected UBS' contention that the FHFA
lacked standing to sue.
Friday's decision is a victory for the FHFA and could add
pressure to settle on the 17 banks and lenders the agency is
suing to recoup losses at Fannie Mae and Freddie Mac on roughly
$200 billion of mortgage securities.
The decision upholds a May 2012 ruling by U.S. District
Judge Denise Cote in Manhattan. Its reasoning will apply in the
14 other FHFA lawsuits she handles, plus a 15th lawsuit in
Connecticut. The other FHFA case is in California.
UBS spokeswoman Karina Byrne did not immediately respond to
requests for comment. FHFA General Counsel Alfred Pollard said
he was pleased with the decision.
The agency sued UBS in July 2011 for fraud and
misrepresentation in its underwriting and sale of debt that
Fannie Mae and Freddie Mac bought from September 2005 through
UBS argued that this lawsuit was filed too late, beyond a
three-year deadline prescribed by law.
But Circuit Judge Denny Chin wrote for a unanimous
three-judge 2nd Circuit panel that the clock began when the FHFA
became the conservator for Fannie Mae and Freddie Mac after
federal regulators seized them on Sept. 7, 2008.
He said the Housing and Economic Recovery Act, a 2008 law
designed to stabilize Fannie Mae, Freddie Mac and other
government-sponsored agencies, allowed the case to go ahead.
"Congress obviously realized that it would take time for
this new agency to mobilize and to consider whether it wished to
bring any claims and, if so, where and how," Chin wrote.
The appeals court also rejected UBS' contention that the
FHFA lacked standing to sue.
That argument was based on the premise that the appointments
of FHFA director Edward DeMarco and his interim predecessor
James Lockhart were unconstitutional because they failed to go
through proper procedures.
Chin said the 2008 law empowered President Barack Obama to
appoint DeMarco after Lockhart departed.
Among the other banks whose cases are overseen by Cote are
Barclays Plc, Bank of America Corp, Citigroup
Inc, Deutsche Bank AG, Goldman Sachs Group Inc
and JPMorgan Chase & Co.
In January, the FHFA settled an 18th lawsuit, against
General Electric Co.
The case is Federal Housing Finance Agency v. UBS Americas
Inc et al, 2nd Circuit Court of Appeals, No. 12-3207.