NCUA Files Another MBS Lawsuit
The NCUA has sued RBS Securities for $685 million, alleging that that firm misled Western Corporate FCU (WesCorp) when it sold it mortgage-backed securities that led to its ultimate collapse.
The lawsuit, which was filed on July 18 in federal court in Los Angeles, is the third lawsuit filed by the NCUA stemming from the collapse of five corporate credit unions and the second against RBS. The agency said it plans to file between five and 10 lawsuits.
After taking over five corporate credit unions (in addition to U.S. Central and Wes Corp, last September the agency conserved the $7.4 billion Members United Corporate FCU, the $9.5 billion Southwest Corporate FCU and the $1.2 billion Constitution Corporate FCU), the NCUA held bonds that had once been worth $50 billion. The agency sold the bonds in 13 guaranteed note transactions that netted $28.3 billion.
The collapse of five corporate credit unions caused the agency to design and implement a rescue plan that it estimates could cost credit unions approximately $20 billion. It involved borrowing money from the Treasury Department to set up the Temporary Corporate Credit Union Stabilization Fund. Natural person credit unions are paying for the rescue through assessments that are scheduled to continue through 2020.