By Saabira Chaudhuri
The National Credit Union Administration has sued Wells Fargo & Co., alleging the San Francisco lender contributed to the failure of five credit unions.
NCUA on Tuesday said it brought the suit against Wells Fargo in federal court on behalf of five failed corporate credit unions. The regulator alleges that Wells Fargo failed to fulfill its duties as trustee for 27 residential mortgage-backed securities trusts, and that the credit unions collapsed in part because they bought $2.4 billion in faulty residential mortgage-backed securities from the trusts between 2004 and 2007.
The NCUA said the damages it will seek will be determined at trial.
"We strongly disagree that Wells Fargo is in any way responsible for any losses incurred on these transactions," said Trisha Schultz, a spokeswoman for the bank.
The regulator, which oversees more than 6,000 credit unions, placed the five corporate credit unions into conservatorship during the height of the financial crisis. Corporate credit unions provide financing, check clearing and other services for the traditional consumer credit unions that lend money and take deposits from individuals.
The suit comes less than a week after NCUA said it had filed a similar suit against U.S. Bancorp and Bank of America Corp., alleging the same five credit unions bought $5.8 billion in mortgage backed securities from 99 trusts for which the two banks served as trustees. U.S. Bank didn't immediately respond to a request for comment, while Bank of America declined to comment.
"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 in a Tuesday statement. "This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect."
Last year, NCUA received $1.42 billion as part of a $13 billion settlement struck between J.P. Morgan Chase & Co. and a number of agencies, resolving four lawsuits filed by the credit union regulator.
Since 2011, the NCUA has filed at least 20 lawsuits related to residential mortgage-backed securities against a string of Wall Street heavyweights. The NCUA contended in those lawsuits that the credit unions collapsed in part because they purchased $17 billion worth of faulty residential mortgage-backed securities from the Wall Street firms.
Write to Saabira Chaudhuri at email@example.com
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