In filing to dismiss its lawsuit alleging securities fraud, lawyers for Wachovia Capital Markets asked the NCUA a question that has haunted the regulator ever since the collapse of U.S. Central FCU: why didn't the corporate more carefully consider the risks involved in purchasing $122 million worth of Alt-A backed MBS?

According to court documents filed April 4 in Kansas City, Wachovia, since purchased by Wells Fargo, contests NCUA's claim that the MBS offering documents contained "untrue statements of material fact or omitted to state material facts" in violation of the federal Securities Act of 1933 and the Kansas Uniform Securities Act, and loan originators "systematically abandoned" disclosed underwriting guidelines.

Not so, says Wachovia's legal team. For example, disclosures provided to the corporates revealed that 73% of the adjustable rate, interest-only loans offered by Wachovia required little or no documentation of borrowers, and that "exceptions to the underwriting standards are permitted when compensating factors are present," court documents state.