UPDATE 1-U.S. appeals court says FHFA suit against UBS may proceed
* 2nd Circuit says FHFA has standing, did not sue too late
* UBS said to sell toxic mortgages bought by Fannie, Freddie
NEW YORK, April 5 (Reuters) - A federal appeals court in New York said Friday the Federal Housing Finance Agency could proceed with its lawsuit against UBS AG over mortgage losses at Fannie Mae and Freddie Mac.
In rejecting UBS' request to dismiss the case, the 2nd U.S. Circuit Court of Appeals said FHFA's case was timely because it began within three years after the agency became the conservator for Fannie Mae and Freddie Mac. The 2nd Circuit also said the FHFA had standing to pursue the case.
FHFA had sued UBS for fraud and misrepresentation in connection with Fannie Mae's and Freddie Mac's purchase of $6.4 billion of residential mortgage-backed securities, from September 2005 through August 2007, that UBS had sponsored or underwritten.
UBS spokeswoman Karina Byrne did not immediately respond to requests for comment.
The decision upheld a ruling by U.S. District Judge Denise Cote which also rejected UBS' bid to dismiss the lawsuit.
Its reasoning will apply in similar cases that Cote oversees in which the FHFA sued 14 other banks and lenders, including Barclays Plc, Bank of America Corp, Citigroup Inc, Deutsche Bank AG and JPMorgan Chase & Co .
The case is Federal Housing Finance Agency v. UBS Americas Inc et al, 2nd Circuit Court of Appeals, No. 12-3207.