Investments Lending

Barclays, Wachovia to pay $378 million to NCUA to settle RMBS losses

Pushes NCUA’s total recovery to $2.2 billion

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Barclays (BCS) and Wachovia, now a part of Wells Fargo (WFC), will pay a total of $378 million to the National Credit Union Administration as part of two separate settlements stemming from losses related to purchases of residential mortgage-backed securities.

In 2013, the NCUA filed suit against Royal Bank of Scotland (RBS), Morgan Stanley (MS) and eight other institutions over the sale of nearly $2.4 billion in mortgage-backed securities to Members United and Southwest corporate credit unions.

At the time, NCUA alleged that RBS, Barclays, JPMorgan Chase (JPM), Credit Suisse (CS), UBS (UBS) and other institutions sold toxic MBS to both corporate credit unions.

The NCUA announced Monday that it reached settlement agreements with Wachovia to the tune of $53 million, and Barclays for $325 million.

With the $378 million from the Wachovia and Barclays settlements, NCUA has recovered $2.2 billion in several large settlements.

In September, RBS agreed to a $129.6 million settlement with the NCUA over similar claims.

When it sued the financial institutions, the NCUA alleged that the firms made misrepresentations in connection with the underwriting and subsequent sales of MBS.

The corporate credit unions subsequently became insolvent, were placed into NCUA conservatorship and later liquidated as a result of losses from the faulty bonds, which caused significant losses to the credit union system, according to the NCUA.

NCUA uses the net proceeds to reduce Temporary Corporate Credit Union Stabilization Fund assessments charged to federally insured credit unions to pay for the losses caused by the failure of five corporate credit unions.

“In order to help minimize losses and future costs to the credit union system, NCUA is committed to pursuing recoveries against financial firms we maintain contributed to the corporate crisis,” NCUA Board Chairman Debbie Matz said. “The agency has a statutory obligation to secure recoveries for credit unions and ensure that consumers remain protected, and we take that responsibility very seriously.”

Once the Barclays settlement is complete, NCUA will dismiss pending suits against the firm in federal district courts in New York and Kansas.

Once the Wachovia settlement is complete, NCUA will dismiss pending claims against the firm in federal district courts in California, Kansas and New York.

Neither Barclays nor Wachovia admit fault in their settlements.

NCUA continues to pursue litigation in federal courts in New York, Kansas and California against financial firms, including Goldman Sachs, UBS, Credit Suisse and Morgan Stanley, based on the sale of faulty securities that caused the collapse of five corporate credit unions.

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