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 saabira.chaudhuri@wsj.com
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