NEW YORK. CUNA Mutual Group’s CUMIS Insurance filed a motion in federal court yesterday asking the court to enforce a subpoena seeking documents from Standard & Poor’s regarding the Wall Street agency’s review of $72 million of faulty mortgage-backed securities the credit union insurer bought from RBS Securities.
CUNA Mutual is asking the U.S. Court for the Western District of Wisconsin to order the Wall Street bank to buy back the failed MBS it sold to the credit union insurer’s MEMBERS’s Life Insurance Co. and CUMIS Insurance Society units. Yesterday’s motion was filed in the U.S. District Court for the Eastern District of New York, where S&P is headquartered.
S&P’s role in the sale of billions of dollars of faulty mortgage securities to investors, including WesCorp FCU and Eastern Financial Florida CU, is the focus of a civil suit filed last month by the U.S. Justice Department.
CUNA Mutual claims that RBS, the target of dozens of investor suits, including two by NCUA over corporate credit union claims, packed the MBS with subprime mortgage loans originated by five lenders that have since filed for bankruptcy and inflated the value of the mortgages in order to sell them to investors. The lenders, all of whom have filed Chapter 11 bankruptcy over the past few years, are Washington Mutual, First Magnus Financial Corp., Delta Funding, New Century Mortgage Corp., and Fremont Investment & Loan.
The credit union insurer is seeking to invoke a right of recission in the MBS sales agreement requiring that RBS buy back the faulty mortgage bonds.
A key issue in the case is the role Wall Street agencies, like S&P and Fitch, played in the marketing of the MBS. CUNA Mutual filed an earlier motion to compel Fitch to produce documents in the case, which was dismissed after a settlement between the parties.
