Another lawsuit centered around mortgage securities backed by faulty loans may be brewing during a time when courts are warming up to finally holding some major financial institutions accountable for the mortgage crisis, which seems to only be worsening.
The National Credit Union Administration (NCUA) has threatened to sue four banks and investment firms unless they refund more than $50 billion for mortgage-related bonds that went bad, according to the Wall Street Journal. Most consider it unlikely that such a refund will be made and an ensuing lawsuit is expected.
WSJ reported that Goldman Sachs, Bank of America’s Merrill Lynch unit, Citigroup, and J.P. Morgan Chase are accused of causing the collapse of five wholesale credit unions: U.S. Central Federal Credit Union, Western Corporation Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, and Constitution Corporate Federal Credit Union, which the NCUA took control of in 2009 and 2010.
All four of the accused have been under heavy fire for their role in the mortgage and housing crisis and lawsuits continue to mount against them. Recently, a number of popular mass joinder lawsuits have been gaining momentum against some of the other major banks as well. Most of the lawsuits allege some type of fraud or misrepresentation by the banks in question and homeowners have been quick to jump on the bandwagon. When push comes to shove, it seems homeowners are quite willing to sue their lenders in hopes of protecting their homes.
The four firms are accused of misrepresenting the risks of the bonds, which are now worth about $25 billion, which is half of their face value. Last year the NCUA began selling off some of the bonds to try to recoup some of the losses. With no seeming solution in the offing that would change the value of the bonds, a lawsuit is likely.
