The Supreme Court has denied an appeal from several banks regarding a lawsuit filed by NCUA concerning the sale of mortgage-backed securities that contributed to the failure of two corporate credit unions more than seven years ago.
The lawsuit was originally filed by NCUA in its role as liquidating agent for US Central Corporate FCU and Western Corporate FCU, both of which failed in 2009. NCUA alleges that Wells Fargo, the Royal Bank of Scotland, Nomura Holdings Inc. and Novation Cos. Inc. misrepresented the securities when they were sold in 2006 and 2007.
On Monday, those five banks were denied dismissal of the suit by the Supreme Court.
"We are pleased with the justices' action, and our litigation against institutions that sold faulty mortgage-backed securities to corporate credit unions will continue," NCUA Spokesman John Fairbanks told Credit Union Journal.
CUNA's deputy general counsel Mary Dunn called the SCOTUS decision "another positive development for [NCUA] and credit unions."
In seeking a dismissal, the banks alleged that NCUA waited too long to file its lawsuit. The 10th Circuit Court of Appeals ruled in favor of NCUA in August — upholding an earlier decision — which led to the banks taking their case to the Supreme Court.
As of now there is no timeline for when the case will proceed in the lower court, but NCUA continues to file suits to recover funds it spent during the financial crisis and as a result of the failed corporates.
In December it filed two suits — against Wells Fargo, and US Bank and Bank of America, respectively — alleging that those institutions failed to fulfill their duties as MBS trustees.
This article originally appeared in Credit Union Journal.
