The National Credit Union Administration (NCUA) late Monday filed its third lawsuit alleging violations of federal and state laws related to misrepresentations in the sale of MBS to now defunct corporate credit unions.
The new suit includes allegations against defendant RBS. To date, it is the second time NCUA has sued RBS in regard to MBS sales. (RBS declined to comment)
The agency also previously filed a similar suit against another Wall Street firm and anticipates there will five to ten legal actions aimed at recovering losses from the purchase of MBS, the devaluation of which during the downturn caused the failures of five wholesale (corporate) credit unions.
The most recent suit, filed in California where the failed Western Federal Corporate Credit Union was based, seeks more than $629 million in damages.
The regulator alleges that sellers and underwriters made several material misrepresentations in the offering documents that caused WesCorp to believe the risk of loss associated with the investments was “minimal,” when it was “substantial.”
Two similar suits were filed almost a month ago against RBS and JPMorgan Securities in Kansas Federal District Court that has jurisdiction over another failed corporate credit union, U.S. Central. JPM had no comment on that litigation.