September 15, 2015
On September 15, 2015, the Firm’s client, the National Credit Union Administration Board (“NCUA”), accepted an offer of judgment from RBS Securities, Inc. (“RBS”) in the NCUA’s lawsuit alleging that RBS sold residential mortgage-backed securities (“RMBS”) backed by defective mortgage loans that led to the failure of two credit unions for which the NCUA serves as liquidating agent.
In November 2014, the Firm filed a First Amended Complaint in the United States District Court for the Southern District of New York alleging that RBS misrepresented the quality of mortgage loans backing securities purchased by the two credit unions, Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union, from 2006 to 2007. The complaint specifically alleged that RBS made numerous misrepresentations in RMBS offering documents, including that originators adhered to the underwriting guidelines set out in the offering documents for the mortgages in the pools collateralizing the RMBS, that the loans had certain loan-to-value ratios individually and in the aggregate, and that the borrowers had certain debt-to-income ratios, thereby misleading investors into believing there was a low risk of borrower default on loans underlying the RMBS. The credit unions suffered significant losses on securities comprised of poorly-performing mortgage loans purchased from RBS.
Pursuant to an offer of judgment dated September 2, 2015, RBS offered to pay nearly $130 million in addition to attorney’s fees and costs to settle the NCUA’s lawsuit rather than go to trial. This settlement represents another highly favorable outcome in just one of the many cases the NCUA has brought to recover billions of dollars for failed credit unions based on claims that the credit unions were misled by investment banks into purchasing shoddy RMBS.