ALEXANDRIA, Va. (12/29/14)--The National Credit Union Administration has filed a lawsuit suit in federal court against Wells Fargo Bank, National Association, alleging the bank has failed to fulfill its duties as trustee for 27 residential mortgage-backed securities trusts.
The agency is suing in its capacity as liquidating agent for five failed corporate credit unions.
"Like other trustees against whom NCUA is pursuing claims, Wells Fargo neglected its statutory and contractual obligations to certificate holders, including the five corporate credit unions," said NCUA Chair Debbie Matz. "This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect."
The NCUA's complaint states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and the bank, as trustee, had contractual and statutory duties to protect the interests of certificate holders.
The complaint states that, despite knowing about defects in the mortgage loans, Wells Fargo failed to provide required notices to certificate holders and other parties. It also failed to take timely action to force the repurchase, substitution or cure of defective mortgage loans or otherwise preserve trust remedies.
"We are gratified the agency continues to take efforts to lessen losses to credit unions. We have been encouraging NCUA to take all reasonable actions necessary to maximize recoveries from the institutions that were responsible for the events that contributed to the corporate failures," said Eric Richard, Credit Union National Association general counsel. "Ultimately, we are hopeful that credit unions will share in the fruits of these efforts when the liquidations of the corporates is complete and all funds owing to the Treasury have been repaid."
Five corporate credit unions--U.S Central, WesCorp, Members United, Southwest and Constitution--purchased approximately $2.4 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007.
Those securities were faulty and lost substantial value, contributing to the failure of all five corporates.
The NCUA's complaint seeks damages to be determined at trial.