NCUA Sues Wells Fargo
The NCUA filed suit against Wells Fargo Bank National Association in an attempt to recover more corporate credit union investment losses by suing trustees. The regulator recently filed suit against Deutsche Bank, U.S. Bank and Bank of America claiming similar legal violations.
“Like other trustees against whom NCUA is pursuing claims, Wells Fargo neglected its statutory and contractual obligations to certificate holders, including the five corporate credit unions,” NCUA Board Chairman Debbie Matz said. “This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect.”
Wells Fargo was a trustee for 27 residential mortgage-backed securities trusts.
The agency was the liquidating agent for five failed corporate credit unions, including WesCorp, U.S Central, Members United, Southwest and Constitution. The corporate credit unions bought roughly $2.4 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007, which ultimately lost considerable value.
“Defendant’s failures resulted in the trusts and certificate holders suffering losses rightfully borne by other parties,” the complaint said.
“Had Defendant adequately performed its contractual and statutory obligations, breaching loans would have been removed from the loan pools underlying the certificates and returned to the responsible party. Defendant’s improper conduct directly caused losses to certificate holders like the Plaintiffs,” the complaint also said.
CUNA General Counsel Eric Richard said CUNA has been encouraging the NCUA to take all possible actions to maximize recoveries from the institutions responsible for events that contributed to the corporate failures.
“Ultimately, we are hopeful that credit unions will share in the fruits of these efforts when the liquidations of the corporates is complete and all funds owing to the Treasury have been repaid,” he said.
NAFCU Senior Vice President and General Counsel Carrie Hunt applauded the NCUA for “leaving no stone unturned” in pursuing legal remedies for losses incurred from the corporate crisis.
“We support NCUA’s efforts to seek recoveries from the responsible entities and hope eventually to have these funds returned to the credit unions that paid hefty assessments to cover the costs of the corporate losses on the mortgage-backed securities,” she said.