UBS AG will pay the Federal Housing Finance Agency $885 million for allegedly conning Fannie Mae and Freddie Mac into buying more than $5 billion in dubious residential mortgage-backed securities. The FHFA announced the deal Thursday, following UBS's July 22 disclosure that it had agreed in principle to a settlement. UBS said it continues to "vigorously deny" the FHFA's claims.
The UBS deal removes a key defendant from the ongoing litigation, which the FHFA and its lawyers at Quinn Emanuel Urquhart & Sullivan and Kasowitz Benson Torres & Friedman unleashed against 18 banks in 2011. UBS's exposure wasn't nearly as great as some other remaining defendants, like JPMorgan Chase & Co. and Bank of America's Countrywide Financial. But Southern District Judge Denise Cote (See Profile) chose the FHFA's case against UBS as a bellwether on key motions to dismiss, and UBS's lawyers at Skadden, Arps, Slate, Meagher & Flom took the lead in arguing the crucial threshold question of whether most of the FHFA's claims are time-barred.
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