Wednesday, November 30, 2011

NCUA suing Wachovia over mortgage-backed securities

The federal agency that supervises credit unions is suing former Charlotte bank Wachovia, claiming the bank misrepresented mortgage-backed securities it sold to credit unions that later failed.

The National Credit Union Administration claims Wachovia, which has since been taken over by Wells Fargo, misstated the risk associated with millions in residential mortgage-backed securities sold to U.S. Central Federal Credit Union and Western Corporate Federal Credit Union.

U.S. Central and Western each bought $44 million in such securities from Wachovia. U.S. Central also bought $112 million in securities from a third-party that was underwritten by Wachovia.

“NCUA continues to do everything within our authority to seek maximum recoveries and ensure that those who caused the problems in wholesale credit unions pay for the losses incurred by retail credit unions,” said NCUA Board Chairman Debbie Matz in a statement. “By filing these suits, we intend to hold responsible parties accountable for their actions.”

A Wells Fargo spokesman says the bank will defend itself against the claims, according to media reports.

The suit, filed in federal court in Kansas, is part of an ongoing drive to recoup money lost on soured mortgage backed securities. The NCUA has previously filed suit against JP Morgan Chase and Goldman Sachs with similar allegations. Citigroup and Deutsche Bank Securities have settled with the agency.