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Pending Settlements Over Faulty RMBS Sales Bring Total Recovered by NCUA to $2.2 Billion

suitecase-moneyThe total amount recovered from litigation against banks that sold toxic residential mortgage-backed securities (RMBS) to corporate credit unions has now reached $2.2 billion with two recently announced pending settlements, according to an announcement from the National Credit Union Association (NCUA), a chief regulator for credit unions in the United States.

Wachovia, based in Charlotte, North Carolina, and British financial firm Barclays agreed to pay $53 million and $325 million, respectively, to resolve claims from the NCUA of losses suffered by corporate credit unions stemming from the purchase of the faulty securities.

“NCUA’s litigation efforts are helping minimize the costs of the corporate crisis to the credit union system, and those efforts will continue,” NCUA Board Chairman Debbie Matz said. “The agency has a statutory obligation to protect credit unions from those costs, and we will pursue the available legal remedies in order to hold the institutions that sold the faulty securities accountable for their actions.”

According to the announcement from the NCUA, the net proceeds from the settlements are used by the Association to reduce Temporary Corporate Credit Union Stabilization Fund assessments charged to federally insured credit unions in order to pay for the losses caused by the failure of five corporate credit unions.

NCUA sued Wachovia, which was acquired by Wells Fargo in 2008, in 2011. The Association filed suit against Barclays, the U.S. subsidiary of the British financial services firm, in 2012. Once the settlements are completed, NCUA will dismiss pending suits against both firms in federal district courts in California, New York and Kansas. As part of the settlement, neither Wachovia nor Barclays do not admit any fault.

Neither Barclays nor Wells Fargo could immediately be reached for comment on the settlements.

“The agency has a statutory obligation to protect credit unions from those costs, and we will pursue the available legal remedies in order to hold the institutions that sold the faulty securities accountable for their actions.”

—Debbie Matz

While the pending litigation against the firms will be dropped when the settlements are completed, however, NCUA is still pursuing suits in federal courts in New York, Kansas, and California against other large financial firms such as Goldman Sachs, Credit Suisse, UBS, and Morgan Stanley, over the sale of toxic RMBS that caused the failure of the five corporate credit unions.

According to NCUA, the Association also has litigation pending against securities firms alleging manipulation of interest rates through the London Interbank Offer Rate (LIBOR) system, which is a violation of state and federal anti-trust law. The Association also has suits pending against other financial firms, accusing them of failing to perform their duties as trustees of RMBS trusts, according to NCUA.

The agency has other litigation pending against securities firms alleging violations of state and federal anti-trust law by manipulation of interest rates through the London Interbank Offer Rate (LIBOR) system. NCUA also has pending suits against financial firms alleging their failure to perform their duties as trustees of residential mortgage-backed securities trusts.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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