The National Credit Union Administration (NCUA) announced that it has reached settlements with Citigroup and Deutsche Bank regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. NCUA said that it is the first regulatory agency to recover losses on behalf of failed financial institutions that resulted from investments in residential mortgage-backed securities.
Citigroup agreed to pay NCUA $20.5 million and Deutsche Bank Securities agreed to pay NCUA $145 million. Citigroup and Deutsche bank reportedly did not admit fault, which is typical in settlements of this type.
NCUA said the proceeds will be used to reduce assessments charged to credit unions to pay for the losses. Losses from wholesale credit union failures are initially paid from the Temporary Corporate Credit Union Stabilization Fund. This fund is in turn repaid through assessments against all federally insured credit unions. Thus, recoveries such as these settlements reduce the amount of future assessments on credit unions.
“NCUA will continue to fulfill our statutory responsibility to secure maximum recoveries for credit unions and ensure that consumers remain protected,” NCUA Board Chairman Debbie Matz was quoted as saying, adding: “As part of our resolution strategy for the five failed credit unions, we raised over $28 billion in liquidity by re-securitizing troubled assets.”
After placing the five failed corporate credit unions into liquidation, NCUA re-securitized the “troubled” mortgage-backed securities and sold them with a government-backed guarantee. The purchasers were not identified.
NCUA also stated that it has filed four lawsuits against other securities firms alleging violations of federal and state securities laws and misrepresentations in the sale of hundreds of securities.
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in mortgage securities litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. For further information, please contact us.