NCUA files new lawsuit against U.S. Bank & BOA
The agency claims banks unlawfully withdrew investment trust funds to pay for legal costs from the residential mortgage-backed securities debacle.
In a new lawsuit, the NCUA claimed U.S. Bank and Bank of America unlawfully withdrew money from residential mortgage-backed securities trust funds to pay for their legal costs from court cases following the subprime mortgage debacle that triggered the 2008 financial crisis and led to the demise of several corporate credit unions.
The NCUA filed a 68-page lawsuit and 15 supporting documents on Dec. 5 in U.S. District Court in New York City, which is seeking a court order that would force the banks to pay back all of the investment funds from the trusts that held billions in the subprime residential mortgage-back securities, RMBS. The banks allegedly used these RMBS funds to pay for their legal costs from other investor lawsuits that claimed U.S. Bank and BOA allegedly failed in their duties in managing the RMBS investments. And because the banks allegedly did not fulfill their contractual obligations, the NCUA argued that U.S. Bank and BOA were not entitled to withdraw funds from the trust funds to pay their legal fees.
The corporate credit unions —- U.S. Central Federal Credit Union, Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Credit Union and other investors —- invested $4.8 billion in the RMBS. The NCUA is the designated liquidating agent of the corporate credit unions.
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