(Deletes paragraph 13 because of erroneous figure on loans in
US Bancorp's case after the trial)
By Nate Raymond and Jonathan Stempel
NEW YORK, Sept 6 A U.S. judge signaled on
Tuesday that UBS AG may escape liability for at least a
portion of an estimated $2.1 billion of losses stemming from
residential mortgage-backed securities it sold in 2006 and 2007
before the U.S. housing market collapsed.
In a 239-page decision, U.S. District Judge Kevin Castel in
Manhattan said U.S. Bancorp, as trustee for three trusts
issuing the securities, did not show that UBS was willfully
blind toward deficiencies in many of the loans.
"The trusts have not proved that UBS took deliberate actions
to avoid knowledge that widespread breaches had occurred
throughout the loans held by the trusts, thereby triggering
UBS's repurchase obligations," Castel wrote.
Castel nonetheless said UBS had been put on notice about
some problem loans, and would need to repurchase or pay damages
on 13 out of 20 he examined.
The judge directed the hiring of a "lead master" to review
thousands of loans underlying the securities, before determining
the extent to which damages might be warranted.
Representatives for UBS and US Bancorp declined to comment.
The decision follows one of a handful of trials, which
Castel heard without a jury, over whether investment banks
misled investors about the quality of mortgage-backed
securities, a main factor in the 2008 financial crisis.
UBS was previously sued by bond insurer Assured Guaranty Ltd
, which was represented by the same lawyers representing
US Bancorp, and settled that case in 2013 for $358 million.
At the nearly month-long trial, which ended in May, US
Bancorp said UBS breached contractual promises regarding the
quality of 9,342 of the 17,082 mortgage loans.
Many of the loans had been issued by lenders specializing in
riskier loans, including the former Countrywide Financial Corp,
IndyMac Bancorp and American Home Mortgage Investment Corp.
In his decision, Castel also rejected several of U.S.
Bancorp's other claims, including its proposed method for
finding that some loans' loan-to-value ratios were incorrect.
UBS has said the trustee sought to prove liability for 1,630
loans solely with that method.
The number of loans on which UBS might still be liable
following Castel's decision was not immediately clear.
The case is US Bank NA v. UBS Real Estate Securities Inc,
U.S. District Court, Southern District of New York, No.
(Reporting by Nate Raymond and Jonathan Stempel; editing by