NCUA Files Another Suit Against Wall Street Bank

ALEXANDRIA, Va. — NCUA has filed another suit against one of the major Wall Street banks in relation to the failed corporate credit unions.

The newest suit, filed in federal court against HSBC Bank USA, National Association, alleges that HSBC violated state and federal laws by failing to fulfill its duties as a trustee for 37 residential mortgage-backed securities trusts that contributed to the failure of five corporates.

U.S. Central, WesCorp, Members United, Southwest and Constitution corporate CUs purchased approximately $1.97 billion in residential mortgage-backed securities issued form the trusts between 2004 and 2007, subsequently losing value and contributing to the failure of all five corporates, NCUA alleges.

"As with the other trustees we have sued, HSBC failed to live up to its obligations under federal and state law, and we want the bank held accountable," NCUA Chairman Debbie Matz said in a statement. "As our complaint states, instead of protecting the trusts and the certificate holders, HSBC sat by as the trusts wasted away. This failure caused significant harm to trust beneficiaries, including the corporate credit unions and ultimately consumer credit unions."

The full complaint, available online, seeks damages to be determined at trial, but states the value o the securities was dependent upon the quality fo the pooled mortgage loans contained in the trust. As the trustee, NCUA alleges, HSBC had contractual, statutory and common law duties to protect the interests of certificate holders. Despite knowing about the defective loans, NCUA says, HSBC failed to provide the required notices to multiple parties, did not properly monitor loan services and failed to take timely action to find a solution to the problem.