More than a week after Space Coast Credit Union announced its mortgage securities lawsuit against several Wall Street banks, a judge has ordered both parties to attend a non-binding mediation session.
A federal judge said the $3 billion Space Coast and the five banks and two rating agencies must agree to a confidential mediation session within 14 days. If an agreement is not met the clerk of the court will appoint a mediator.
The case could be removed from the trial calendar and both parties may face sanctions if the mediation session is not held, according to the judge’s order.
Space Coast in Melbourne, Fla., recently filed suit against Merrill Lynch, Wachovia Capital, Barclays Capital, Lehman Brothers’ Richard Fuld, and credit rating agencies Standard & Poor’s and Moody’s alleging that the defendants caused more than $100 million in losses to Eastern Financial Florida Credit Union.
Space Coast acquired Eastern Financial in 2009, which sustained financial losses from 2008 to 2010. In large part, those losses resulted in the collapse of Eastern Financial and the loss of its independent strength, thereby creating the need for a merger partner, Space Coast said.
Space Coast said it identified several ways that the defendants allegedly manipulated the credit ratings including making out-of-model or manual adjustments to the rating agencies’ credit rating models to obtain better ratings for the mortgage-related securities at issue in the case.
Meredith Gibson, senior vice president of marketing at Space Coast, told Credit Union Times this latest development is just the case taking its course. The credit union’s attorney did not have any additional comments at this time, she added.