Barclays (BARC) will pay $325M to resolve two civil cases related to residential mortgage-backed securities sales that took place during the housing boom. The plaintiff of both securities lawsuits is the National Credit Union Administration, which regulates federal credit unions.
A number of credit unions under NCUA’s purview failed after they invested in mortgage-backed securities. The union believes that the banks that underwrote the securities misled buyers.
RMBS are investments that pool the returns and risks of personal mortgages. The quality of these securities came into question several years ago when homeowners began to default on the mortgages backing them. NCUA believes that it is its statutory duty to obtain recoveries for credit unions while making sure that customers are protected.
By settling, Barclays is not admitting fault. According to The New York Times, the bank sponsored and underwrote approximately $35M in mortgage securitizations in the US and sold $19.4B in loans that were originated and sold to third parties by affiliates of an entity that it had acquired. Upon completion of this settlement, NCUA will dismiss pending litigation against Barclays in district court in Kansas and New York.
Barclays, which settled a similar case filed by the Federal Housing Finance Agency for $280M in 2014, stopped trading in the RMBS market a few months ago. It is a defendant in several other lawsuits involving RMBSs.
NCUA has gone after UBS (UBS), Goldman Sachs (GS), HSBC (HSBC), Morgan Stanley (MS), Credit Suisse (CS), and Royal Bank of Scotland (RBS), with the latter settling for nearly $130M in September. In that case, the bank resolved claims over RMBSs bought by Members United and Southwest corporate credit unions. However, NCUA still has cases against Royal Bank of Scotland (RBS) in federal courts in California and Kansas over residential mortgage-backed securities sales that were made to Wescorp. and U.S. Central.
In another RMBS case, NCUA just announced a $53M settlement with Wachovia for losses involving securities bought by corporate credit unions. The lawsuit was brought in 2011. Wells Fargo (WFC), which bought Wachovia in 2008, will issue the payment.
Barclays Agrees to Settle Mortgage Lawsuits for $325 Million, The New York Times, October 19, 2015
NCUA Agrees to $129.6 Million Offer from Royal Bank of Scotland, NCUA, September 16, 2015
Barclays settles $325m legal battle over crisis-era mortgage securities, The Telegraph, October 19, 2015
NCUA Legal Recoveries Reach $2.2 Billion with Wachovia Settlement, NCUA, October 19, 2015