The US Court of Appeals for the Second Circuit is denying UBS AG’s (UBSN) bid to dismiss the Federal Housing Finance Agency’s mortgage-backed securities lawsuit accusing the financial firm of misrepresenting the quality of the loans underlying the residential MBS that Freddie Mac and Fannie Mae bought. FHFA is the mortgage financiers’ appointed conservator.
In its appeal, UBS contended that the MBS lawsuit was filed too late under federal law. However, the 2nd circuit, affirming U.S. District Judge Denise Cote’s ruling, determined that the filing period for type of securities case was extended by the Housing and Economic Recovery Act of 2008.
The RMBS lawsuit is one of 17 FHFA cases against large financial institutions over alleged misrepresentations involving over $200 million in mortgage-backed securities. Judge Cote is presiding over 15 of these MBS lawsuits.
Late last year, the lenders, including Citigroup (C), Barclays Plc (BCS), and Bank of America Corp. (BAC), told the 2nd circuit that Cote’s ruling was not only wrong but also that it would increase their exposure to federal and state securities claims. The banks involved in the mortgage-backed securities cases before the judge recently filed a request before the appeals court arguing that Cote’s pretrial rulings establish a litigation framework that they described as “grossly inequitable, clearly erroneous.” They believe that a number of her decisions are “gravely prejudicial” and not only wrongly attempted to deny them the ability to find evidence on may possible legal defenses, but also, they are meant to pressure the banks to settle the securities lawsuits.
Meantime, Securities Industry and Financial Markets Association, which submitted a separate brief, expressed concern that Judge Cote’s decision widened the housing recovery law’s time-limit provisions over what Congress had intended for it to be and that this could lead to “arbitrary decisions” being made. However, the US Justice Department has maintained that it was the lawmakers that “reset” the statute of limitations for filing securities claim. In its briefing, the DOJ said that the Housing and Economic Recovery Act allows for the creation of the FHFA to help remedy the financial problems plaguing Freddie Mac and Fannie Mae after the housing crisis dropped the values of their MBSs.
If you, your family, friends, neighbors or associates have been subjected to Mortgage Backed Securities Fraud, please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation.
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