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* 2nd Circuit says FHFA has standing, did not sue too late
* UBS said to have sold toxic mortgages to Fannie, Freddie
By Bernard Vaughan
NEW YORK, April 5 (Reuters) - A federal appeals courtrejected UBS AG's bid to dismiss a U.S. regulator'slawsuit seeking to hold the Swiss bank responsible for losses onmortgage securities at Fannie Mae and Freddie Mac.
The 2nd U.S. Circuit Court of Appeals said the FederalHousing Finance Agency did not wait too long to sue UBS over the$6.4 billion of mortgage securities that Fannie Mae and FreddieMac bought. It also rejected UBS' contention that the FHFAlacked standing to sue.
Friday's decision is a victory for the FHFA and could addpressure to settle on the 17 banks and lenders the agency issuing to recoup losses at Fannie Mae and Freddie Mac on roughly$200 billion of mortgage securities.
The decision upholds a May 2012 ruling by U.S. DistrictJudge Denise Cote in Manhattan. Its reasoning will apply in the14 other FHFA lawsuits she handles, plus a 15th lawsuit inConnecticut. The other FHFA case is in California.
UBS spokeswoman Karina Byrne did not immediately respond torequests for comment. FHFA General Counsel Alfred Pollard saidhe was pleased with the decision.
The agency sued UBS in July 2011 for fraud andmisrepresentation in its underwriting and sale of debt thatFannie Mae and Freddie Mac bought from September 2005 throughAugust 2007.
UBS argued that this lawsuit was filed too late, beyond athree-year deadline prescribed by law.
But Circuit Judge Denny Chin wrote for a unanimousthree-judge 2nd Circuit panel that the clock began when the FHFAbecame the conservator for Fannie Mae and Freddie Mac afterfederal regulators seized them on Sept. 7, 2008.
He said the Housing and Economic Recovery Act, a 2008 lawdesigned to stabilize Fannie Mae, Freddie Mac and othergovernment-sponsored agencies, allowed the case to go ahead.
"Congress obviously realized that it would take time forthis new agency to mobilize and to consider whether it wished tobring any claims and, if so, where and how," Chin wrote.
The appeals court also rejected UBS' contention that theFHFA lacked standing to sue.
That argument was based on the premise that the appointmentsof FHFA director Edward DeMarco and his interim predecessorJames Lockhart were unconstitutional because they failed to gothrough proper procedures.
Chin said the 2008 law empowered President Barack Obama toappoint DeMarco after Lockhart departed.
Among the other banks whose cases are overseen by Cote areBarclays Plc, Bank of America Corp, CitigroupInc, Deutsche Bank AG, Goldman Sachs Group Inc and JPMorgan Chase & Co.
In January, the FHFA settled an 18th lawsuit, againstGeneral Electric Co.
The case is Federal Housing Finance Agency v. UBS AmericasInc et al, 2nd Circuit Court of Appeals, No. 12-3207.
