ALEXANDRIA, Va.—NCUA has filed suit in federal court against U.S. Bank National Association and Bank of America National Association, alleging the banks violated state and federal laws by failing to fulfill their duties as trustees for 99 residential mortgage-backed securities trusts.
NCUA’s suit seeks damages to be determined at trial.
“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. “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.”
Five corporate credit unions—U.S. Central, WesCorp, Members United, Southwest and Constitution—purchased approximately $5.8 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. Those securities lost value, contributing to the failure of all five corporates, NCUA stated.
NCUA’s complaint states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and the banks, as trustees, had contractual and statutory duties to protect the interests of certificate holders. The complaint states that, despite knowing about defects in the mortgage loans, U.S. Bank and Bank of America failed to provide required notices to certificate holders and other parties and failed to take timely action to force the repurchase, substitution or cure of defective mortgage loans or otherwise preserve trust remedies.
Related