By Jessica Matthews 
Quick Summary: UBS is suing Bank of America for $200 million over an alleged breach of indemnification agreement related to toxic mortgages originated by Countrywide Financial before the 2008 crisis. The lawsuit, filed in New York in July 2024, highlights the continuing financial fallout from the subprime mortgage crisis and could set precedents for banking acquisition liabilities.
Recent court filings reveal that Bank of America faces a new lawsuit from UBS over $200 million in crisis-era mortgage liabilities. I’ve examined the case documents to unpack what this means for both institutions.
The Heart of the Legal Battle: Countrywide’s Toxic Mortgages
When I first read about this case, one thing became immediately clear: this isn’t just about money.
UBS filed the lawsuit in New York State Supreme Court in July 2024, claiming Bank of America refuses to honour a critical indemnification agreement.
The story begins with Countrywide Financial, once America’s largest mortgage lender.
Countrywide had agreed to protect UBS from claims related to problematic mortgages that UBS bundled into securities.
When Bank of America swooped in to acquire struggling Countrywide for $2.5 billion in 2008, they inherited these obligations.
Or did they? That’s the £200 million question at the centre of this lawsuit.
This case bears similarities to other significant financial litigation, such as the Ashcroft Capital lawsuit that also involved contractual disputes between major investment entities.
Inside UBS’s $200 Million Claim Against Bank of America
Let’s break down exactly what UBS wants:
- Reimbursement for an $885 million settlement UBS paid to the US Federal Housing Finance Agency in 2013
- Coverage for a confidential settlement with the Federal Home Loan Bank of San Francisco in 2016
- Approximately $53 million in direct legal fees
What makes this case fascinating is that UBS isn’t claiming Bank of America directly misled anyone.
Instead, they argue Bank of America must honour Countrywide’s promise to protect UBS from losses related to mortgage-backed securities (MBS) that turned toxic.
For non-banking experts, MBS are investment products created by bundling multiple mortgages together and selling shares to investors. They became infamous during the 2008 crisis when many underlying mortgages defaulted.
From Boom to Bust: The Timeline Leading to Litigation
This dispute has deep roots in the subprime mortgage crisis:
Pre-2008: Countrywide Financial, led by Angelo Mozilo, became notorious for aggressive lending practices including minimal documentation loans and risky subprime mortgages.
July 2008: As Countrywide teetered on collapse, Bank of America acquired it in what many analysts called a “fire-sale” for $2.5 billion.
2013: UBS paid $885 million to settle with the US Federal Housing Finance Agency over claims related to Countrywide mortgages.
2016: UBS reached another significant settlement with the Federal Home Loan Bank of San Francisco over similar issues.
2016-2024: According to court documents, UBS engaged in “extensive discussions and negotiations” with Bank of America regarding indemnification.
July/August 2024: After negotiations failed, UBS filed its lawsuit in New York state court.
Early 2025: The case remains under judicial review with no judgments issued yet.
The Financial Chess Game: What’s Really at Stake
While $200 million sounds massive, let’s put it in perspective:
Bank of America reported a net income of $27.1 billion in 2024 with total assets of approximately $3.26 trillion.
For them, this lawsuit represents less than 1% of annual profits.
But the precedent could be priceless.
If Bank of America loses, it potentially opens doors for similar claims from other financial institutions that bundled Countrywide mortgages.
For UBS, recovering $200 million would certainly boost their balance sheet, but the strategic value goes beyond simple accounting.
This case reflects broader concerns about financial accountability that also appear in discussions surrounding investment vehicles like the White Oak Impact Fund, which emphasizes transparency in financial dealings.
Reputation and Trust: The Invisible Balance Sheet
The courtroom battle extends beyond financial statements.
For Bank of America, this lawsuit resurrects the ghost of Countrywide Financial, widely considered one of the primary villains in the 2008 crisis story.
Angelo Mozilo’s Countrywide became infamous for its predatory lending practices that contributed significantly to the housing bubble.
Bank of America has spent years and billions trying to distance itself from the Countrywide legacy.
This lawsuit drags that history back into the spotlight.
For UBS, their aggressive pursuit of indemnification could be interpreted two ways: either as prudent financial management or as opportunistic litigation.
The banking world watches closely, as do regulators and investors.
The Legal Domino Effect: Implications for Future Bank Acquisitions
I’ve spoken with several financial analysts who believe this case could establish critical precedent.
When a major financial institution acquires another bank, what obligations do they inherit?
The answer to this question impacts every banking merger and acquisition strategy.
If Bank of America prevails, it potentially limits successor liability in banking acquisitions.
If UBS wins, buyers would need to factor potential indemnification claims into acquisition pricing, potentially making troubled bank rescues more expensive.
This comes at a time when banking consolidation continues to reshape the financial landscape.
Historical Context: Not the First Rodeo for Either Bank
This isn’t the first major legal battle for either institution:
UBS paid $1.435 billion in 2023 to settle with the Department of Justice over claims of fraud in mortgage-backed securities sales from 2006-2007.
Bank of America has paid over $50 billion in legal costs related to its Countrywide acquisition.
Both banks were co-defendants in the European Government Bonds Antitrust Litigation, where they and other institutions paid $120 million to settle allegations of price-fixing.
This new lawsuit adds another chapter to their complex legal histories.
Impact on Everyday Banking Customers
While corporate litigation often seems distant from everyday banking, major lawsuits can affect consumer services indirectly.
Unlike technical issues that cause direct service disruptions (similar to when Pennsylvania EBT cards went offline for system maintenance), litigation costs are typically absorbed into broader operational expenses.
For most Bank of America customers, this lawsuit won’t directly impact their accounts or services.
However, protracted litigation can affect a bank’s strategic priorities, potentially influencing product development, customer service resources, and even branch expansion plans.
FAQ: Bank of America UBS Lawsuit Explained
Why did UBS wait so long to sue Bank of America?
Court documents reveal UBS spent years in negotiations with Bank of America before filing. They only turned to litigation after exhausting other avenues for resolution.
How might this lawsuit affect banking customers?
The direct impact on retail customers should be minimal. This dispute involves wholesale banking operations rather than retail banking services.
Could this case trigger more crisis-era lawsuits?
Possibly. If UBS succeeds, other financial institutions might pursue similar claims against banks that acquired crisis-era lenders with indemnification agreements.
Is this lawsuit likely to go to trial?
Based on similar financial litigation, a settlement remains possible. However, the significant principles at stake make a protracted legal battle more likely than in typical commercial disputes.
What’s the significance of filing in New York state court?
New York courts have extensive experience with complex financial litigation. Their established case law on successor liability and indemnification makes them a natural venue for this dispute.
Looking Forward: What Happens Next
The lawsuit currently sits with the New York State Supreme Court, New York County, awaiting initial procedural steps.
Both banks have assembled formidable legal teams.
Discovery and pretrial motions will likely continue through 2025.
Banking analysts will watch this case closely for signals about how courts view acquisition-related liabilities.
The financial press will scrutinize every filing for clues about strategy.
The financial industry will be watching closely as Bank of America faces a new lawsuit from UBS that could establish precedent for how acquisition-related liabilities are handled in the banking sector.