Fallen MBS Prompts CUNA Mutual Suit
CUNA Mutual Insurance Society, CUMIS Insurance Society and MEMBERS Life Insurance Co., have filed suit against RBS Securities Inc. claiming that the firm made false representations of its offering documents at the time that more than a dozen residential mortgage-backed securities were purchased by the three plaintiffs.
According to the CUNA Mutual complaint, between 2004 and 2007, the company said RBS “induced” it to buy 15 certificates in 10 separate RMBS offerings by making representations about the credit quality of the pools of mortgage loans collateralizing those RMBS.
CUNA Mutual said RBS also falsely represented that loan in the pools had an LTV or CLTV ratio above 100%. On average, 26.9% of the sampled mortgage loans had LTV or CLTV ratios above 100%, meaning the outstanding loans on the mortgaged properties exceeded the value of the properties at the time of loan origination.
According to the complaint, RBS also “dramatically overstated” the percentage of the mortgages in the underlying loan pools that were owner occupied. On average, each of the 10 RMBS overstated owner occupancy rates by 12.1%, the complaint said.