Market updates and sector developments

UBS has agreed to pay US$1.435bn in penalties to settle a case relating to historical alleged misconduct surrounding the underwriting and issuance of RMBS pre-financial crisis. The US Department of Justice filed a civil action in 2018 alleging that UBS defrauded investors in connection with the sale of 40 transactions between 2006 and 2007 by making “false and misleading statements” about the characteristics of underlying mortgage loans.

The DOJ said in a statement that the settlement brings the total amount of RMBS-related civil penalties paid by banks, originators and ratings agencies to more than US$36bn. The investigations have been carried out by the RMBS Working Group, comprised of around 200 attorneys, investigators, analysts, and staff from state and federal agencies.

Federal Housing Finance Agency (FHFA) inspector general Brian Tomney said in the statement: “The [FHFA] office of inspector general, together with our RMBS Working Group partners, investigated and held accountable those who sought to victimise Fannie Mae, Freddie Mac and investors by selling fraudulent mortgage-backed securities.”

UBS says the settlement has been “fully provisioned” in prior periods.

In other news…

Vesttoo files for Chapter 11

Vesttoo has commenced Chapter 11 bankruptcy protection proceedings in the US District Court for the District of Delaware, with the intention of emerging with a more sustainable capital structure. The firm says the move will also provide a platform from which to “aggressively pursue” all parties that harmed its business. Meanwhile, Aon has reportedly expanded its attempt to freeze Vesttoo’s assets with a petition in the Tel Aviv District Court relating to the firm’s holdings in Israel (SCI 14 August).