ALEXANDRIA, Va. –NCUA said it will receive $69.8 million from UBS in damages and interest for claims arising from losses to the former Members United and Southwest corporate credit unions related to purchases of residential mortgage-backed securities. The announcement comes one day after NCUA announced a $50.3-million settlement with Credit Suisse, as CUToday.info reported here.
“Part of NCUA’s comprehensive strategy for resolving the corporate crisis has been an aggressive litigation effort to secure recoveries from the Wall Street firms whose sale of faulty securities precipitated the crisis,” NCUA Board Chairman Debbie Matz said in a statement. “Because of our ongoing efforts to hold responsible parties accountable, we are minimizing net losses to credit unions and should ultimately be able to provide a future rebate to credit unions for their Temporary Corporate Credit Union Stabilization Fund assessments.”
As liquidating agent for Members United and Southwest, the NCUA Board initiated litigation against UBS. In February, NCUA accepted UBS’s offer of judgment of $33 million in damages. With the addition of prejudgment interest determined by the court, the amount to be paid by UBS increased to $69.8 million, according to the agency. UBS will also be liable for attorneys’ fees and expenses in an amount to be determined.
To date, NCUA has obtained more than $3.1 billion in legal recoveries in litigation related to the sale of faulty securities to corporate credit unions. The net proceeds from these settlements are being used repay the Stabilization Fund’s outstanding borrowings from the U.S. Treasury and to decrease the amount that surviving credit unions must pay to recoup the losses of the corporate credit union system.
NCUA still has litigation pending against UBS in federal court in Kansas for sales of faulty residential mortgage-backed securities to U.S. Central and WesCorp corporate credit unions. The agency has additional lawsuits pending against several other firms based on the sale of faulty securities. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.
NAFCU applauded NCUA's efforts to recover money for the movement.
“NAFCU and our members appreciate NCUA’s tenacity in pursuing recoveries on the sale of faulty securities that led to the downfall of five corporate credit unions,” said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. “NAFCU will continue to urge the agency to pursue its aggressive legal recovery efforts and to be transparent in how and when the funds recovered will be refunded to credit unions.”
NAFCU noted that NCUA’s recoveries in its suits over MBS will offset the total costs to credit unions of the corporate stabilization program, adding that NCUA is looking at a potential rebate to credit unions after the program concludes in 2021.