The NCUA board has filed a suit in federal court against HSBCBank USA, claiming the bank violated state and federal law.

The agency, suing in its capacity as liquidating agent for fivefailed corporate credit unions, alleged that the bank did notfulfill its duties as trustee for 37 residential mortgage-backedsecurities trusts.

“As with the other trustees we have sued, HSBC failed to live upto its obligations under federal and state law, and we want thebank held accountable,” NCUA Board Chairman Debbie Matz said. “As our complaint states,instead of protecting the trusts and the certificate holders, HSBCsat by as the trusts wasted away. This failure caused significantharm to trust beneficiaries, including the corporate credit unionsand ultimately consumer credit unions.”

According to the NCUA, WesCorp, U.S. Central, Members United, Southwest andConstitution purchased about $1.97 billion in residentialmortgage-backed securities issued from the trusts between 2004 and2007. Those securities had lost value and contributed to thefailure of the five corporate credit unions.

“Defendant failed to even ensure the trusts had full possessionof the original notes and mortgages and the mortgage loan files hadbeen properly reviewed for irregularities,” the complaint read. “IfDefendant had fulfilled its obligations, a significant percentageof the mortgage loans in the trusts would have been repurchased orsubstituted.”

The complaint also alleged that HSBC failed to provide requirednotices to certificate holders and other parties, and did notproperly monitor loan servicers.

“Moreover, an overwhelming number of events alerted Defendant tothe fact that the trusts suffered from numerous problems, yet itdid nothing,” the complaint went on to read.