Newsroom

NCUA on Wednesday announced it is has filed a lawsuit against U.S. Bank National Association and Bank of America National Association, saying the banks failed to follow through on their legal duties as trustees for 99 residential mortgage-backed securities trusts, in turn harming corporate credit unions.

"NCUA will diligently continue to pursue legal remedies against parties that contributed to losses suffered by the credit union system," NCUA Board Chairman Debbie Matz said in a statement. "U.S. Bank and Bank of America had obligations under federal and state law, and they failed to live up to those obligations. This caused significant harm to trust beneficiaries, including the corporate credit unions and ultimately consumer credit unions. Our legal efforts are aimed at promoting accountability within the financial system."

The now-defunct U.S. Central, WesCorp, Members United, Southwest and Constitution corporate credit unions bought about $5.8 billion in RMBS issued from the trusts between 2004 and 2007. NCUA charges that those securities lost value, causing the failure of all five corporates.

In previous suits, NCUA charged that Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual and Bear Stearns violated federal and state securities laws in their sale of RMBS to the five corporates. It has settled claims worth more than $335 million with Citigroup, Deutsche Bank Securities, HSBC and Bank of America.

NAFCU continues to encourage NCUA to pursue all remedies available in mitigating the cost to credit unions of corporate stabilization. NCUA says no future stabilization assessments appear to be on the horizon. Meanwhile, final costs for the Temporary Corporate Credit Union Stabilization Fund and completion of the NCUA Guarantee Note program will affect any return to credit unions after the fund expires in 2021 and the NGN program is concluded.

NCUA's complaint is available online here.