NEW YORK–A federal judge has dismissed nearly all of a lawsuit against Bank of America and US Bancorp that had been filed by NCUA and which sought to hold the two banks liable for losses on roughly $6.8 billion in toxic mortgage securities that helped drive five corporate CUs into conservatorship.
U.S. District Judge Katherine Forrest in federal court in Manhattan rejected claims by NCUA that the banks failed in their roles as trustees for 98 residential mortgage-backed securities trusts.
Forrest ruled that NCUA lacked standing to sue more than 89 trusts because the right to sue had been previously assigned, leaving the regulator with only an interest in payment streams.
The judge further dismissed NCUA’s claims that the two banks had breached their fiduciary duties or acted in bad faith with the other nine trusts. The only surviving claims are those of breach of contract on the nine trusts, which the banks did not seek to dismiss.
The toxic mortgages had been purchased by Members United Corporate, Southwest Corporate, U.S. Central and WesCorp.
To date NCUA has recovered $2.46 billion through lawsuits it began filing in 2011.
The judge’s decision came shortly after NCUA won a victory against UBS AG over mortgage backed securities it had sold.