Press

ALEXANDRIA, VA (December 23, 2014) — The National Credit Union Administration has filed suit  in federal court against Wells Fargo Bank National Association, alleging the bank violated state and federal laws by failing to fulfill its duties as trustee for 27 residential mortgage-backed securities trusts.

The agency is suing in its capacity as liquidating agent for five failed corporate credit unions. NCUA’s complaint, available online here, seeks damages to be determined at trial.

“Like other trustees against whom NCUA is pursuing claims, Wells Fargo neglected its statutory and contractual obligations to certificate holders, including the five corporate credit unions,” NCUA Board Chairman Debbie Matz said. “This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect.”

Five corporate credit unions—U.S Central, WesCorp, Members United, Southwest and Constitution—purchased approximately $2.4 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. Those securities were faulty and lost substantial value, contributing to the failure of all five corporates.

NCUA’s complaint states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and the bank, as trustee, had contractual and statutory duties to protect the interests of certificate holders. The complaint states that, despite knowing about defects in the mortgage loans, Wells Fargo failed to provide required notices to certificate holders and other parties and failed to take timely action to force the repurchase, substitution, or cure of defective mortgage loans or otherwise preserve trust remedies.