Bank of America Corp. and US Bancorp were sued by the agency that oversees federal credit unions, which claimed the banks failed as trustees over securities backed by home mortgages that defaulted after the 2008 credit crisis.
The lawsuit, filed in Manhattan federal court, claims that Bank of America and US Bancorp served as trustees for residential mortgage-backed securities in 99 trusts with an original face value of $5.8 billion.
They failed to review mortgage loan files for irregularities, missing “numerous problems,” including that the trusts “suffered enormous losses due to the high number of mortgage defaults, delinquencies, and foreclosures caused by defective loan origination and underwriting,” according to the complaint by the National Credit Union Administration Board.
“Even after ample evidence came to light that the trusts were riddled with defective loans, defendants shut their eyes to such problems,” according to the complaint. “As participants in many roles in the securitization process, defendants were economically intertwined with the parties they were supposed to police.”
Bill Halldin, a spokesman for Charlotte, N.C.-based Bank of America, declined to comment on the suit. Teri Charest, a spokeswoman for Minneapolis-based US Bancorp, didn’t immediately reply to a call and an e-mail seeking comment.
The agency sued on behalf of five credit unions that it liquidated: U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union and Constitution Federal Corporate Federal Credit Union.