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NCUA Sues Wells Fargo as Trustees of Mortgage-Backed Securities
Monday, December 29, 2014 6:10 AM

The National Credit Union Administration has announced that is has filed suit in federal court against Wells Fargo Bank National Association, alleging the bank violated state and federal laws by failing to fulfill its duties as trustee for 27 residential mortgage-backed securities trusts.

The agency is suing in its capacity as liquidating agent for five failed corporate credit unions:  U.S Central, WesCorp, Members United, Southwest, and Constitution. The credit unions purchased approximately $2.4 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. Those securities were faulty and lost substantial value, contributing to the failure of all five corporates.

The complaint, available online here, states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and the bank, as trustee, had contractual and statutory duties to protect the interests of certificate holders.

The complaint also states that, despite knowing about defects in the mortgage loans, Wells Fargo failed to provide required notices to certificate holders and other parties and failed to take timely action to force the repurchase, substitution, or cure of defective mortgage loans or otherwise preserve trust remedies.