The National Credit Union Administration has filed residential mortgage-backed securities lawsuits against JPMorgan (JPM), Morgan Stanley (MS), UBS (UBS), Royal Bank of Scotland Group (RBS), Barclays (BARC), and Credit Suisse (CS) accusing the financial firms of selling $2.7 billion of these fraudulent securities to the credit unions. The Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union paid over $416 million for the RMBS in the case against Morgan Stanley and $1.9 billion from the other defendants. One of the credit unions contends that Wachovia (WB), Goldman Sachs (GS), Ally Securities and Wells Fargo (WFC) also defrauded it.
According to the NCUA’s RMBS fraud lawsuits, the investment banks issued misrepresentations related to the underwriting and sale of the securities. Offering documents allegedly contained false statements or omitted facts that were material. The government regulator is accusing the originators of systematically ignoring underlying guidelines in offering documents, which made the mortgage-backed securities’ risks higher than what was presented.
The MBS fraud lawsuits make claims under state and federal securities laws. Whatever is recovered will go toward the Temporary Corporate Credit Union Stabilization Fund.
Already, NCUA has settled RMBS fraud lawsuits against Bank of America (BAC), Citibank (C), Deutsche Bank (DB), and HSBC for more than $335 million.
Regulator sues Morgan Stanley, eight others over faulty securities, Reuters, September 23, 2013
National Credit Union Administration Sues Wall Street Banks For Fraud In Mortgage Market, FireDogLake, September 24, 2013
More Blog Posts:
JPMorgan to Pay $920M to Settle London Whale Debacle & $80M Over Credit-Card Practice Allegations, Institutional Investor Securities Blog, September 19, 2013
Bank of America, JPMorgan Chase Among Banks Sued by Danish Pension Funds in Credit Default Swaps Lawsuit, Institutional Investor Securities Blog, August 15, 2013
SEC and DOJ Sue Bank of America Over Alleged $850M RMBS Fraud, Institutional Investor Securities Blog, August 15, 2013