NEW YORK (5/20/15)--A U.S. District judge Monday dismissed three lawsuits--including one by the National Credit Union Administration--brought against U.S. Bank National Association and Bank of America, National Association regarding their duties as trustees of residential mortgage-backed securities (RMBS).
NCUA filed the lawsuit in December alleging the two banks failed to fulfill their duties as trustees for 99 of the trusts. Despite knowing about defects in the mortgage loans, the complaint said, U.S. Bank and Bank of America failed to provide required notices to certificate holders and other parties and failed to take timely action to force the repurchase, substitution or cure of defective mortgage loans or otherwise preserve trust remedies (News Now Dec. 18).
U.S. District Judge Katherine Forrest ruled the NCUA lacked standing to sue U.S. Bank and Bank of America over 74 of the trusts that the agency moved into new, independent trusts (Bloomberg May 19).
Nothing in federal securities law “authorizes NCUA (or the [corporate credit union] for which it acts as liquidating agent) to sue on behalf of separate statutory trusts,” Forrest ruled, according to court documents.
"NCUA is disappointed with the decision, and the agency is considering its options," John Fairbanks, NCUA public affairs specialist, told News Now in an email.
According to court documents, plaintiffs will have an opportunity to replead.
Five corporate credit unions--U.S Central, WesCorp, Members United, Southwest and Constitution--purchased roughly $5.8 billion in RMBS issued from the trusts between 2004 and 2007. Those securities lost value, contributing to the failure of all five (News Now).