Claiming that RBS Securities Inc. made false representations at the time that more than a dozen residential mortgage-backed securities were purchased by CUNA Mutual Insurance Society, CUMIS Insurance Society and MEMBERS Life Insurance Co., the companies have filed a lawsuit against the bank to recover $72 million in losses.

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.

RBS made these representations through its offering documents, which consisted of registration statements, prospectuses, term sheets, free writing prospectuses and prospectus supplements, CUNA Mutual said.

The documents supposedly contained various statistical representations about the loan pools backing the RMBS, including their loan-to-value ratios, combined loan-to-value ratios and owner-occupancy rates.

“For investors like CUNA Mutual, these quantitative representations were material because they provided an indication of anticipated default rates in the loan pools and anticipated foreclosure recoveries on the defaulted loans,” the complaint read.

CUNA Mutual said it relied on RBS's quantitative representations in deciding to purchase 15 certificates in the10 separate RMBS offerings. After CUNA Mutual's purchases, all 10 of the securities performed poorly and the 15 certificates have since lost much of their value, according to the complaint.

CUNA Mutual said it is seeking to recover $72 million, the amount it would take for RBS to buy back the failed RMBS.

“This action is about righting a wrong and is being taken in the best interests of CUNA Mutual Group and its policyholders” wrote Jim Buchheim, CUNA Mutual vice president of corporate communications, to Credit Union Times in a statement. “The complaint we filed fully explains why we took this action. However, because this issue is in litigation, we will not comment further on the lawsuit.”

Instant Insights /

CUNA Mutual Seeks $72 Million in Mortgage-Backed Securities Suit

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