NEW YORK— The National Credit Union Administration has accepted a judgment for $33 million, plus pre-judgment interest, from Swiss banking giant UBS AG to resolve claims from losses related to purchases of residential mortgage-backed securities.
This is the credit union regulator's latest recovery from legal action following the corporate credit union crisis. More than $2.4 billion in legal recoveries have been obtained, and those funds are used to pay down the Temporary Corporate Credit Union Stabilization Fund assessments which were levied on CUs to cover the losses of the five failed corporates.
John Fairbanks, a public relations specialist for NCUA, said the district court still must calculate interest, "so the case is not yet settled, and the final amount of the total judgment has yet to be determined."
The agreement, when it becomes finalized, would resolve one of a number of lawsuits that the regulator has filed against various big banks related to the sale of MBS prior to the financial crisis of 2008.
Reuters reported that this latest deal – which was disclosed in a filing in federal court on Thursday in New York -- related to faulty MBS sold and underwritten by UBS to Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union for almost $432.4 million from 2006 to 2007. (Both credit unions were subsequently liquidated).
NCUA had claimed that the securities offering documents had contained "untrue statements" that the loans had been originated in tandem with underwriting guidelines. As such, this made the securities riskier than believed, leading to "significant losses" incurred by the credit unions that purchased the MBS.
NCUA has a similar lawsuit against UBS that is pending in the state of Kansas, which is not affected by the latest development.
