NCUA Files Its Largest MBS Suit To Date

Posted on December 22nd, 2012 in Federal Issues, Mortgages, Securities By BuckleySandler

On December 17, the National Credit Union Administration (NCUA) announced a lawsuit on behalf of four insolvent credit unions against a mortgage securitizer in which the agency alleges violations of federal and state securities laws in the sale of $3.6 billion in mortgage-backed securities. The complaint, which the NCUA filed in the U.S. District Court for the District of Kansas, claims that the securitizer made numerous misrepresentations and omissions in the offering documents regarding adherence to the originators’ underwriting guidelines, which concealed the true risk associated with the securities and routinely overvalued them. When the allegedly risky securities lost value, the NCUA claims, the credit unions were forced into conservatorship and liquidated as a result of the losses sustained. The NCUA has eight similar suits pending, and it has previously settled similar claims for more than $170 million with three other mortgage securities firms.