ALEXANDRIA, Va. — NCUA said it has filed suit in federal court against U.S. Bank N.A. and Bank of America N.A., alleging these institutions violated state and federal laws by failing to fulfill their duties as trustees for 99 residential mortgage-backed securities trusts.
NCUA explained that five corporate credit unions — U.S Central, WesCorp, Members United, Southwest and Constitution — bought about $5.8 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. All five credit unions eventually failed as those securities lost value.
NCUA's complaint said the value of such 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 further noted that, despite being aware of 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.
"NCUA will diligently continue to pursue legal remedies against parties that contributed to losses suffered by the credit union system," NCUA Chairman Debbie Matz said in a statement. "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."
Damages sought by the suit will be determined at trial, NCUA added.
