NCUA has filed suit against another big banking company over mortgage-backed securities.
The credit union regulator sued Wells Fargo Bank in federal court Tuesday, alleging that Wells violated state and federal laws by failing to fulfill its duties as a trustee for 27 residential mortgage-backed securities trusts.
In a complaint posted online, NCUA seeks damages to be determined at trial, and is suing in its capacity as liquidating agent for five failed corporate credit unions.
“Like other trustees against whom NCUA is pursuing claims, Wells Fargo neglected its statutory and contractual obligations to certificate holders, including the five corporate credit unions,” NCUA Chairman Debbie Matz said in a statement. “This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect.”
The agency has already filed lawsuits against U.S. Bank, Bank of America, Deutsche Bank and others in similar suits linked to damages the corporates sustained as a result of more than $2.4 billion in purchases of faulty mortgage-backed securities.
NCUA’s complaint against Wells Fargo states that the securities’ value varied by the quality of the pooled loans contained in each trust, and as a trustee, Wells had contractual and statutory duties to protect the interests of certificate holders.
The complaint also alleges that in spite of knowing the loans were bad, Wells did not provide required notices to certificate holders and other parties and did not take timely action to force repurchase, substitution or cure of defective mortgage loans or provide other remedies.
Credit union trade groups applauded NCUA’s most recent lawsuit.
“NAFCU appreciates NCUA’s vigor in leaving no stone unturned in pursuing legal remedies to make credit unions whole for the losses they incurred as a result of the collapse of corporate credit unions,” said NAFCU SVP and General Counsel Carrie Hunt.
“We support NCUA’s efforts to seek recoveries from the responsible entities and hope eventually to have these funds returned to the credit unions that paid hefty assessments to cover the costs of the corporate losses on the mortgage-backed securities.”
CUNA General Counsel Eric Richard said: “We are gratified the agency continues to take efforts to lessen losses to credit unions. We have been encouraging NCUA to take all reasonable actions necessary to maximize recoveries from the institutions that were responsible for the events that contributed to the corporate failures. Ultimately, we are hopeful that credit unions will share in the fruits of these efforts when the liquidations of the corporates is complete and all funds owing to the Treasury have been repaid.”