On September 23, the National Credit Union Administration (as liquidator for the Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union), filed nine separate suits in the federal district court for the Southern District of New York against several investment banks for a total of $2.4 billion. The NCUA alleges material misrepresentations and omissions of underwriting standards, LTV ratios, owner-occupancy rates, DTI ratios and credit ratings in connection with the credit unions’ alleged purchases of RMBS and brings causes of action under Sections 11 and 12(a)(2) of the Securities Act of 1933 as well as claims for violations of the Illinois and Texas securities laws. Complaint Against Morgan Stanley.
National Credit Union Administration
Federal Court Grants in Part UBS and JP Morgan Motions to Dismiss RMBS Suits
On September 3, Judge John W. Lungstrum of the United States District Court for the District of Kansas granted in part and denied in part motions to dismiss by UBS Securities LLC and JP Morgan Securities LLC in four separate actions brought by the National Credit Union Administration (NCUA), as liquidator of certain failed credit unions. In each action, NCUA alleged that the defendants made misrepresentations and omissions in RMBS offering documents concerning, among other things, the loan-to-value ratios of the underlying loans and the underwriting guidelines used to originate those loans. In the action against UBS, the Court dismissed claims as to 10 of the 22 certificates at issue as time barred, ruling that the federal Extender Statute may not be extended by a tolling agreement. Order. In the action against JP Morgan, the Court granted the motion to dismiss with leave to amend as to two certificates backed by loans originated by entities as to which NCUA had failed to make any allegations. Order. In the action against JP Morgan as successor to Washington Mutual, the Court dismissed claims as to 31 of the 49 certificates at issue as time barred, also due to the inability of the Extender Statute to be extended by tolling agreement. The court rejected, however, JP Morgan’s argument that NCUA was required to exhaust its claims administratively through the FDIC, as receiver for WaMu, prior to filing suit, holding that the claims could not have been brought administratively against the FDIC because JP Morgan had assumed WaMu’s liabilities. Order. Finally, in the action against JP Morgan as successor to Bear Stearns, the Court dismissed claims as to 37 of the 83 certificates at issue as time barred, also due to the inability of the Extender Statute to be extended by tolling agreement. The Court rejected, however, JP Morgan’s statute of limitations-based arguments concerning the remaining certificates. Order.
Bank of America Reaches Pre-Litigation Settlement with NCUA for RMBS Losses
On April 2, the National Credit Union Administration (NCUA), an independent federal agency that supervises and charters federal credit unions, reached a $165 million settlement with Bank of America, stemming from BofA’s sale of RMBS to failed credit unions. Bank of America did not admit any fault in the agreement. NCUA previously reached similar settlements with Citigroup, Deutsche Bank and HSBC. NCUA did not file a lawsuit against Bank of America, although litigation is pending between NCUA and several other financial institutions. Press Release.
NCUA Sues Wachovia Over Credit Unions’ RMBS Investments
On November 28, 2011, the National Credit Union Administration (“NCUA”), an independent federal agency that supervises and charters federal credit unions, filed a complaint in the federal district court for the District of Kansas against Wachovia Capital Markets LLC. NCUA is suing in its capacity as the liquidating agent of two failed credit unions, U.S. Central Federal Credit Union (“U.S. Central”) and Western Corporate Federal Credit Union (“WesCorp”). NCUA seeks approximately $200 million in damages based on alleged untrue statements and omissions in the offering documents for 5 RMBS purchased by U.S. Central and WesCorp. NCUA asserts causes of action under Sections 11 and 12(a)(2) of the federal Securities Act, as well as violations of the California and Kansas securities laws. Complaint.
NCUA Settles with Citigroup and Deutsche Bank in RMBS Dispute
The National Credit Union Administration (“NCUA”), an independent federal agency that supervises and charters federal credit unions, reached a $145 million settlement with Deutsche Bank and a separate $20.5 million settlement with Citigroup, stemming from the banks’ sales of RMBS to five failed credit unions. The NCUA did not file a lawsuit against either Citigroup or Deutsche Bank, although the NCUA currently has RMBS suits pending against three other financial institutions. Press Release 1. Press Release 2.
Start of Registration Period under S.A.F.E. Act
On January 31, the Fed, the Farm Credit Administration, the FDIC, the National Credit Union Administration, the OCC, and the OTS announced that the Nationwide Mortgage Licensing System and Registry has begun to accept federal registrations as required under the Secure and Fair Enforcement for Mortgage Licensing Act (the S.A.F.E. Act). After the initial registration period expires on July 29, any employee of an agency-regulated institution subject to the registration requirements will be prohibited from engaging in the business of originating residential mortgage loans without first meeting the requirements. FDIC Release. Registration Process. Federal Register Notice.
Joint Agency Release on S.A.F.E. Act Mortgage Originator Requirements
On July 28, the OCC, Fed, FDIC, OTS, Farm Credit Administration and National Credit Union Administration issued final rules requiring certain mortgage loan originators to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E.). The final rules are effective October 1 and the agencies anticipate that the registry could begin accepting federal registrations as early as January 28, 2011. Joint Release. Federal Register Notice and Final Rules.