The 9th Circuit Court of Appeals this week revived a lawsuit the NCUA filed against Wachovia Mortgage Loan Trust and Nomura Home Equity Loan, saying a lower court erred in ruling that the suit was not filed in a timely fashion.
NCUA filed the suit following the liquidation of Western Corporate Federal Credit Union.
In the suit, the NCUA argued that the companies made false and misleading statements in offering mortgage-back securities purchased by Wescorp.
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The lower court had ruled that NCUA had filed suit too late under the statute of limitations. However, the appellate court ruled that the Financial Institutions Reform, Recovery and Enforcement Act of 1989 contained special provisions regarding the failure of financial institutions. Those provisions extended the statute of limitations.
The NCUA placed Wescorp into conservatorship on March 20, 2009 and filed suit on July 18, 2011. The federal district court narrowly and incorrectly interpreted federal law in ruling that the suit was not timely, the appeals court said.
The appeals court sent the suit back to the district court for its consideration.
In April, the NCUA reported that up to that time, it had obtained more than $3.1 billion in legal recoveries in litigation related to the sale of faulty securities to corporate credit unions. The NCUA uses the net proceeds from these settlements to repay the stabilization fund's outstanding borrowings from the U.S. Treasury and to decrease the amount that surviving credit unions must pay to recoup the losses of the corporate credit union system.
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