Settlement Scores $165M from BofA
The NCUA reported April 2 that it scored a $165 million win against Wall Street, reaching a settlement with Bank of America over residential mortgage-backed securities losses at failed corporate credit unions. Bank of America did not admit fault as part of the settlement, the NCUA said in a release.
NCUA Chairman Debbie Matz said in a statement, "These settlements and our ongoing lawsuits further NCUA’s goal of minimizing the losses of the corporate crisis and cutting future costs to credit unions."
The NCUA has recovered $335 million in legal settlements, including agreements with Citigroup, Deutsche Bank Securities and HSBC worth $170.75 million.
Those figures do not include fees due attorneys under a contingency agreement. According to Rep. Darrell Issa (R-Calif.), chairman of the House Committee on Oversight and Government Reform, the NCUA’s contracted lawyers collect 25% of recoveries.
In February the NCUA’s inspector general told Issa in a February 2013 report that the NCUA’s contingency agreements were reasonable. However, the OIG redacted significant portions of that report when it was released to the public and concealed the actual legal costs it had reported to Congress.
When asked exactly how much of the settlement will be applied to corporate losses, NCUA Public Affairs Specialist John Fairbanks said he could not comment on the agency’s arrangements with outside counsel.
NAFCU General Counsel Carrie Hunt said her trade association is "excited" about the settlement and supports the NCUA’s pursuit of recoveries. However in the name of full transparency NAFCU will urge the NCUA to disclose how much of the settlement will go toward paying legal fees.
Using the 25% legal fee estimate provided by Issa’s inquiry, of the $335 million recovered, $83.75 million would be paid to attorneys, with the balance of $251.25 million being applied toward corporate stabilization costs.
That’s almost one-third of the 2012 corporate assessment collected from federally insured credit unions, and could provide some assessment relief to credit unions. Fairbanks said the settlement funds have already been collected by the federal insurer. Currently, the 2013 assessment is estimated to be between 8 and 11 basis points. In 2012, an assessment of 9.5 basis points raked in $800 million.
The NCUA has filed lawsuits against several other firms, including Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual and Bear Stearns, alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.