Bank of America Settlement Ends Mortgage Crisis Lawsuits? Not So Fast

The NCUA, the federal credit union regulator, can now move forward with lawsuits filed in Kansas on behalf of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union seeking damages over $1.74 billion in securities the two failed corporate credit unions purchased. The NCUA alleged in that case and in others that investment banks, including such big names as Wells Fargo (WFC) and Goldman Sachs (GS), knowingly sold securities to corporate credit unions without disclosing significant credit risk in the mortgages supporting them.

The ruling will not only carry weight with the NCUA’s suits but also lawsuits filed by other regulators seeking similar damages from investment banks over mortgage-backed securities losses.

Any additional losses the NCUA collects from the banks would offset corporate stabilization costs. The NCUA announced earlier this year it would not likely charge another corporate assessment to credit unions, as settlements with other banks, assessments and improved legacy asset performance have exceeded remaining corporate settlement expenses. However, the NCUA also downplayed the likelihood credit unions would receive a rebate in 2021, when corporate stabilization ends and the NCUA’s Guaranteed Notes mature.