NCUA Says Sales Of MBS By RBS Securities Led To Failure Of Credit Union
The National Credit Union Administration (NCUA) has filed yet another suit against RBS Securities for losses related to its marketing and sale of mortgage backed securities (MBS) to its credit unions. This lawsuit is for $685 million in compensatory damages stemming from the sale of MBS to Western Corporate FCU (WesCorp), which ultimately led to its failure, according to Investment News. This case filed in federal court in Los Angeles is the second one filed against RBS and the third by the NCUA, following the collapse of five corporate credit unions. According to the NCUA, it says that it intends to file five to ten more cases.
It is alleged that the underwriters and the sellers of the MBS made considerable material misrepresentations to investors in the offering documents. According to court documents, WesCorp was led to believe that the risk of loss of principal was minimal because of the material misrepresentations when, in fact, the risk was substantial. The NCUA took over the $19.3 billion WesCorp on March 29, 2009, the same day it took over the $30 billion U.S. Central corporate Credit union, the largest wholesale credit union. The NCUA also claims that the MBS "were largely underwritten without adherence to the underwriting standards" and were much more risky than WesCorp was led to believe they were.
The other lawsuit filed by the NCUA against RBS Securities was filed on June 20, 2011 in Kansas City seeking $565 million in compensatory damages. The NCUA has sued JP Morgan Securities for $278 million in another case that led to the demise of its credit unions.
If you or your credit union has suffered losses from investing in mortgage backed securities (MBS), please contact our securities law firm for a no obligation consultation at 1-800-259-9010.