NEW YORK–HSBC Holdings has lost a court decision in which it sought to have a lawsuit dismissed against it that had been filed by NCUA.
NCUA is suing the bank alleging it failed to perform its duties as trustee for $2.37 billion of residential mortgage-backed securities that were responsible in part for the failure of five corporate CUs.
U.S. District Judge Shira Scheindlin ruled that NCUA had standing to sue even though most of the debt had been resecuritized, and the new trustee refused to sue HSBC on its behalf. The HSBC lawsuit is one of many filed by the agency since the conservatorship of the failed corporates, which included U.S. Central, Western Corporate, Constitution Corporate, Members United Corporate and Southwest Corporate.
In its various suits NCUA has alleged that the banks and Wall Street firms sold securities that were backed by defective residential mortgages. Other lawsuits targeted trustees who allegedly failed to monitor loan servicers or to require banks to buy back defective loans.
HSBC had argued that NCUA had waited too late to file its lawsuit on March 20, 2015, as the 37 RMBS trusts involved in the suit dated from 2004 to 2007.
According to Judge Scheindlin, NCUA is pursuing the case to “fulfill its governmental purpose of stabilizing the credit union system. It seems perverse to conclude, based on these actions, that NCUA is not bringing suit as a conservator or liquidating agent, simply because it took this extra step."
Scheindlin issued the ruling even though in May of this year U.S. District Judge Katherine Forrest, also in Manhattan, had dismissed a similar NCUA lawsuit against Bank of America Corp and US Bancorp over 74 RMBS trusts, noting that securities there had been resecuritized. Scheindlin said she disagreed with part of Forrest's ruling.