The National Credit Union Association (NCUA) has reached settlements with Citigroup and Deutsche Bank Securities regarding residential mortgage-backed securities sales to five wholesale credit unions that have recently failed.
[IMAGE] Citigroup agreed to pay $20.5 million, and Deutsche Bank agreed to pay $145 million to help lessen the losses incurred when the five credit unions failed. Neither bank admitted to fault when agreeing to the settlement.
Total losses incurred from the five credit union failures stand at $3.3 billion, according to the NCUA.
When wholesale credit unions fail, the losses are paid through the Temporary Corporate Credit Union[COLUMN_BREAK]
Stabilization Fund, which is then replenished by all federally insured credit unions.
The NCUA will use the settlement funds from Citigroup and Deutsche Bank to cover the losses, sparing its members some of the costs.
The NCUA estimates the remaining amount, which must be paid by 2012, will be between $1.8 billion and $6.1 billion.
NCUA board chairman Debbie Matz noted that Citigroup and Deutsche were ""among the first major underwriters to come forward with a settlement proposal, and we appreciate their efforts to resolve potential claims so that we can avoid the expense and delay of litigation.""
The NCUA re-securitized the mortgage-backed securities it blames for the credit union failures and sold them with a government-backed guarantee.
The NCUA is also filing suits against four other securities firms.
""We are fulfilling our statutory responsibility to secure maximum recoveries for credit unions and ensure that consumers remain protected,"" Matz said. ""As part of our resolution strategy for the five failed credit unions, we raised over $28 billion in liquidity by re-securitizing troubled assets.