WASHINGTON (1/14/15)--The Supreme Court has rejected an appeal from several banks regarding a lawsuit filed by the National Credit Union Administration involving the sale of residential mortgage-backed securities more than seven years ago to two corporate credit unions. The Royal Bank of Scotland, Wells Fargo and Co., Nomura Holdings Inc. and Novation Companies Inc. were denied dismissal of the suit Monday.
"NCUA has orchestrated a series of successful legal challenges to banks that sold flawed mortgage backed securities to some of the corporate credit unions," said Mary Dunn, deputy general counsel for the Credit Union National Association. "Additional litigation is pending but the Supreme Court's decision released Monday to reject these banks' request for a review is another positive development for the agency and credit unions."
The NCUA filed its lawsuit in its role as liquidating agent for U.S. Central FCU and Western Corporate FCU, which failed in 2009. The agency alleges the banks made misrepresentations about the securities when they were sold in 2006 and 2007, a violation of federal law.
The banks alleged the NCUA had waited too long to file its lawsuit. The 10th U.S. Circuit Court of Appeals ruled last August in favor of NCUA, prompting the banks to take their case to the Supreme Court.
The lawsuit will now proceed on the merits at the district court level.
The NCUA has filed several lawsuits seeking recoveries of funds it spent during the financial crisis to handle certain corporate credit unions, including two challenges last December. One is against Wells Fargo, the other against U.S. Bank and Bank of America, each alleging the banks failed to fulfill their duties as trustees for 27 and 99 mortgage backed securities, respectively.