Merrill, UBS sued by Schwab over mortgage-backed securities

Units of Bank of America Corp.'s Merrill Lynch & Co., UBS AG and Bear Stearns Cos. were sued by Charles Schwab Corp. over claims they lied or omitted information on mortgage-backed securities
JUL 27, 2010
By  Bloomberg
Units of Bank of America Corp.’s Merrill Lynch & Co., UBS AG and Bear Stearns Cos. were sued by Charles Schwab Corp. over claims they lied or omitted information on mortgage-backed securities it bought from them. Schwab, an independent online broker, claims it paid the firms $130 million for three securities, and that more dubious securities are likely to turn up if the suit is allowed to go forward. The complaint was filed June 29 in state court in San Francisco, where Schwab is based. The securities dealers lied or didn’t disclose information about loans underlying the bonds they sold, including the loan- to-value ratios of mortgages and the number of properties that were not primary residences, according to the complaint. Bill Halldin, a Bank of America spokesman, said the securities Merrill Lynch issued that are identified in the suit are “performing well, are not in default, and therefore we don’t believe there’s any basis for the complaint.” Merrill Lynch is the world’s largest brokerage. Schwab said that when the dealers offered and sold the securities, they “made numerous statements to Schwab about the certificates and the credit quality of the mortgage loans that back them” that were “untrue” or “omitted,” according to the complaint. Schwab also said the firms weren’t truthful about how much they departed from their own standards in making the loans. JPMorgan Chase declined to comment, spokesman Joe Evangelisti said in an e-mail. UBS spokeswoman Karina Byrne didn’t immediately return a call seeking comment after regular business hours yesterday. Wells Fargo & Co. and JPMorgan Chase & Co., which acquired Bear Stearns in 2008, are also named in the complaint. The case is Charles Schwab v. Merrill Lynch, Pierce, Fenner & Smith, 10-501151, California Superior Court (San Francisco).

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