Spokespersons for U.S. Bank and Bank of America declined to comment on the NCUA's lawsuit when reached by CU Times Tuesday.

The independent federal agency's lawsuit is based on 59 trusts that issued the RMBS investment. U.S. Bank and BOA were the trustees that had contractual duties to correct problems with the loans and to take other steps to protect the investment interests made by the corporate credit unions and other investors.

The lawsuit did not specify a monetary judgement against the banks other than an award for all appropriate damages to be determined by a jury.

The NCUA claimed U.S. Bank and BOA unlawfully withdrew trust funds to pay for cases brought by other investors for breaching their trustee duties and allegedly did not meet their burden of proving their entitlement of indemnification. Based on these claims, the federal agency is asking the federal court to force the banks to return all of the funds they used from the investment trusts to pay their own legal fees and other related costs.

What's more, the NCUA is seeking a declaratory judgement regarding the "right to indemnification from the trust funds," which would block the banks from using the trust funds to pay for their litigation expenses or any judgement or settlement from the NCUA's lawsuit or other lawsuits that claimed the banks breached their trustee duties.

According to the NCUA's lawsuit, the banks allegedly failed to perform "even the threshold duties of taking full possession of the original notes and mortgages and properly reviewing the mortgage loan files for irregularities."

"If they had fulfilled their obligations, a significant percentage of the mortgage loans in the trust would have been repurchased or substituted," the NCUA claimed.

Specifically, the federal agency alleged that the banks failed to take proper title of the mortgage loans, inadequately review the mortgage loan files and certify their completeness and did not properly oversee the custodian or its agents.

The lawsuit accused the banks of alleged breach of contract, negligence and gross negligence and breach of fiduciary duty.

The NCUA also alleged that an "overwhelming number of events" alerted the financial institutions that the trusts suffered from numerous problems such as the high number of mortgage delinquencies and defaults and enormous losses, the abandonment of their underwriting standards and the "pervasive disregard of prudent securitization standards."

According to the lawsuit, U.S. Bank and BOA were aware of the impending crisis because they received monthly service reports of defaults and delinquency rates.

By January 2009, the total cumulative losses of the trusts exceeded $1.7 billion with the trusts reporting an average loss of more than $30 million. By January 2011, the cumulative losses for the trusts exceed $7.6 billion with an average loss of more than $128 million, according to the lawsuit.

The NUCA noted that U.S. Bank and BOA allegedly failed to perform their duties because protecting the best interest of the trusts and the corporate credit union investors would have conflicted with the banks' interests.

"As participants in many roles in the securitization process, Defendants were economically intertwined with the parties they were supposed to police," the NCUA claimed. "Further, Defendants had incentives to ignore other parties' misconduct in order to avoid drawing attention to their own misconduct."

Since the liquidation of the corporate credit unions, the NCUA has filed dozens of federal lawsuits against 32 defendants to recover losses.

As of June 30, 2017, the NCUA's legal efforts have yielded recoveries of more than $5.1 billion and legal fees of $1,214,634,208. This is equivalent to 23.5% of total recoveries.