NCUA Settles Claims Against MBS Lawsuits

This story appeared in Bank Digest.

The NCUA and Citigroup have reached a settlement regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. NCUA is the first regulatory agency to recover losses on behalf of failed financial institutions that resulted from investments in these securities. Citigroup has agreed to pay NCUA $20.5 million to reduce the losses associated with the five credit union failures. The settlement with Citigroup does not admit fault on their part. NCUA will use the net proceeds from this settlement to reduce assessments being charged to credit unions to pay for the losses.

“Citigroup is among the first major underwriters to come forward with a settlement proposal, and we appreciate their efforts to resolve potential claims so that we can avoid the expense and delay of litigation,” said NCUA Board Chairman Debbie Matz. “NCUA to date has received a total of $165.5 million in settlement proceeds. These settlements further our goal to minimize losses and thereby reduce the assessments that all credit unions will have to pay. NCUA will continue to fulfill our statutory responsibility to secure maximum recoveries for credit unions and ensure that consumers remain protected.”

The NCUA also reached a settlement with Deutsche Bank Securities regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions. Deutsche Bank Securities agreed to pay NCUA $145 million to reduce the losses associated with the five credit union failures. The settlement with Deutsche Bank Securities does not admit fault on their part. NCUA will use the net proceeds from this settlement to reduce assessments being charged to credit unions to pay for the losses.

“We are fulfilling our statutory responsibility to secure maximum recoveries for credit unions and ensure that consumers remain protected,” said Matz. “As part of our resolution strategy for the five failed credit unions, we raised over $28 billion in liquidity by re-securitizing troubled assets. Deutsche Bank Securities is among the first major underwriters to come forward with a settlement proposal and we appreciate its efforts to resolve potential claims so that we can avoid the expense and delay of litigation. This settlement furthers our goal to minimize losses and thereby reduce the assessments that all credit unions will have to pay.”