SAN FRANCISCO NCUA on Tuesday filed an appeal of the July 13 ruling by a federal court in Los Angeles dismissing most of its $491 million in claims against Goldman Sachs for failed mortgage-backed securities the Wall Street bank sold to U.S. Central FCU and WesCorp FCU one of a growing number of rulings unfavorable to NCUA related to corporate credit unions.
In documents filed with the U.S. Court of Appeals for the Ninth Circuit, NCUA said the lower court erred when it dismissed the claims because it said they were filed too late.
In its petition for interlocutory appeal one that is conducted while the lower court continues the case on the sale of MBS not excluded by the three-year statute of limitations NCUA argues that federal law allows it and the FDIC to start the clock on the three-year time limitation only after a regulator takes over a failed credit union or bank.
“When NCUA placed the Credit Unions into conservatorship in March 2009, most of that time had passed. NCUA thus had virtually no time to investigate the Credit Unions’ claims and file suit,” said the appeal. The lower court, the U.S. District Court for the Southern District of California, rejected NCUA’s position, as has a separate federal court in Kansas in recent days, which in recent weeks dismissed NCUA’s claims against Barclays Capital and Credit Suisse for MBS they sold to U.S. Central and WesCorp. NCUA has appealed those rulings to a separate appeals court, for the Tenth Circuit.
The stakes in the various cases are enormous as NCUA has filed almost $9 billion of claims against Wall Street banks claiming doomed MBS they sold contributed to the failures of U.S. Central and WesCorp, along with three other corporates, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
The outcome of these suits is expected to go a long way to determining billions of dollars in claims brought by Fannie Mae, Freddie Mac and other investors in failed MBS issued by Wall Street. NCUA claims that Goldman Sachs, and its subprime mortgage subsidiary GS Mortgage Securities Corp., negligently packaged poorly underwritten mortgages into MBS that failed within two years of their sale to investors. The various NCUA suits carefully avoid allegations of fraud, which are much more difficult to prove.
NCUA also has sued JP Morgan Chase, RBS Securities, UBS, and three defunct Wall Street banks, Bear Stearns, Wachovia Capital and Washington Mutual, over the collapse of the corporates, which is projected to cost credit unions as much as $16 billion to resolve.
The credit union regulator has reached out of court settlements with Citibank, HSBC and Deutsche Bank over similar claims related to the corporate failures.