Morgan Stanley (MS) will pay $225 million to resolve claims brought by the National Credit Union Administration (NCUA) for Western Corporate Federal Credit Union, U.S. Central Federal Credit Union, Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union. The credit unions contend that the firm left out material facts and made false statements when selling mortgage backed securities (MBS). The credit unions argued that their purchase of the faulty MBS led to their demise.
Structured products, such as MBS, that are tied to residential mortgage-backed securities (RMBS) played a major part in credit unions failing after the 2008 financial crisis. U.S. Central, which was the largest credit union to fail in 2009, sustained billions of dollars of losses after purchasing faulty MBSs.
As of 9/25/15, the unpaid balance of the securities was approximately $194 million, with losses incurred by the certificates at $31 million. As part of the MBS settlement, pending lawsuits against the firm will be dropped in New York and Kansas. Proceeds from the settlement will go toward claims made against the corporate credit unions.
This is not the only settlement the NCUA reached over this matter. In October, it settled with Barclays PLC (BARC) for $325 million and Wells Fargo & Co. (WFC) for $53 million. The NCUA is continuing to go after UBS AG (UBS), Goldman Sachs Group Inc. (GS), RBS (RBS), and Credit Suisse Group AG (CS). It also has filed lawsuits against certain financial firms. The NCUA claims that those firms did not perform their obligations as RMBS trustees.
Our MBS fraud law firm represents investors, including credit unions and community banks, as well as other institutional or individual high-net worth investors in cases against Wall Street firms. Contact the SSEK Partners Group today.
Morgan Stanley will pay $225M in case involving Lenexa credit union, BizJournals, December 11, 2015
Morgan Stanley in $225 Million Pact Tied to Mortgage-Backed Securities, The Wall Street Journal, December 10, 2015