UBS to pay $1.4 billion over fraud in residential mortgage-backed securities

Swiss slope UBS agreed to wage a combined $1.4 cardinal successful civilian penalties implicit fraud and misconduct successful its offering of residential mortgage-backed securities dating backmost to the planetary fiscal crisis, national prosecutors announced Monday.

The bank, successful its ain connection Monday, described the colony arsenic dealing with a "legacy matter" dating from 2006 to 2007, starring up to the fiscal crisis.

The colony concludes the last lawsuit brought by the U.S. Department of Justice against respective of the largest fiscal institutions implicit misleading statements made to the purchasers of those mortgage-backed securities. The cumulative recoveries successful the cases present full $36 billion, according to the Justice Department.

In the years starring up to the fiscal crisis, concern banks packaged, securitized and sold bundles of mortgages to organization buyers. Those securities were rated and graded according to quality, with assorted "tranches" of mortgages hypothetically safeguarding against the hazard of implicit default.

But unbeknownst to the buyers, those mortgages were not arsenic precocious prime arsenic their ratings suggested. UBS, akin to different banks who settled with the Justice Department, were alert that the mortgages underneath the mortgage-backed securities didn't comply with underwriting standards.

UBS conducted "extensive" owed diligence connected the underlying loans earlier it created and sold the securities to its clients, prosecutors alleged, and contempt knowing of the important issues with the products, continued to merchantability them to fiscal success.

The Justice Department has secured settlements with 18 different fiscal institutions implicit mortgage-backed information issues, including Bank of America, Citigroup, General Electric, Goldman Sachs, JPMorgan and Wells Fargo.

Credit Suisse, the defunct Swiss slope present owned by UBS, besides settled with the Justice Department implicit misconduct related to MBS offerings.