UBS

Texas Bank Sues Underwriters and Investment Advisor Over RMBS

On November 11, 2011, Town North Bank NA filed a complaint in the federal district court for the Northern District of Texas against UBS Financial Services Inc., Morgan Stanley & Co. LLC, Merrill Lynch & Co., LLC, J. P. Morgan Securities LLC as successor to Bear Stearns & Co., Inc., and Shay Financial Services, Inc. (Town North’s investment advisor). Town North seeks $113 million in damages, alleging that the defendants misrepresented that the mortgage loans underlying RMBS that it purchased complied with underwriting guidelines, overstated the borrowers’ capacity to repay their mortgage loans, and failed to disclose the quality of loans underlying the securities and their risk of loss. Town North asserts causes of action under Section 10(b) of the Securities and Exchange Act, state law fraud, and breach of fiduciary duty (against Shay Financial only). Complaint.

Investor Group Sues UBS for Mortgage-Backed Securities Losses

On November 2, 2011, Capital Ventures, an investor group, sued UBS in Massachusetts federal court, claiming that UBS Securities misled it into purchasing securities backed by faulty mortgage loans by misrepresenting the quality of those loans in the offering materials. Capital Ventures alleges it purchased more than $109 million worth of mortgage-backed securities from UBS over six separate transactions and that a significant portion of that value has been lost as the mortgages underlying the securities have defaulted. Capital Ventures alleges claims under the Massachusetts Uniform Securities Act. Complaint.

FHFA Sues UBS For Misrepresenting RMBS Risk

On July 27, 2011, Fannie Mae and Freddie Mac’s regulator, the Federal Housing Finance Agency, sued UBS and several of its executives in New York federal court under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. The complaint alleges that between September 2005 and August 2007, Fannie Mae and Freddie Mac purchased over $4.5 billion in RMBS from UBS in connection with 16 different securitizations. Plaintiff claims that the RMBS registration statements, which contained loan and origination information, contained materially false statements regarding the quality of the mortgages in the securitizations, and the complaint focuses specifically on alleged borrower fraud and faulty underwriting practices. Complaint.