ALEXANDRIA, Va. (March 20, 2015) – The National Credit Union Administration Board, as liquidating agent for five failed corporate credit unions and on behalf of certain NCUA Guaranteed Notes Trusts, has filed suit in federal court against HSBC Bank USA, National Association, alleging the bank violated state and federal law by failing to fulfill its duties as trustee for 37 residential mortgage-backed securities trusts.
Five corporate credit unions—U.S Central, WesCorp, Members United, Southwest and Constitution—purchased approximately $1.97 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007. Those securities lost value, contributing to the failure of all five corporate credit unions.
“As with the other trustees we have sued, HSBC failed to live up to its obligations under federal and state law, and we want the bank held accountable,” NCUA Board Chairman Debbie Matz said. “As our complaint states, instead of protecting the trusts and the certificate holders, HSBC sat by as the trusts wasted away. This failure caused significant harm to trust beneficiaries, including the corporate credit unions and ultimately consumer credit unions.”
The complaint, available online here, seeks damages to be determined at trial.
The complaint states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and HSBC, as trustee, had contractual, statutory, and common law duties to protect the interests of certificate holders. Each trust consists of hundreds of residential mortgage loans that were pooled together and securitized for sale to investors.
The complaint charges that, despite knowing about defects in the mortgage loans, HSBC failed to provide required notices to certificate holders and other parties, failed to properly monitor loan servicers, and failed to take timely action to force the repurchase, substitution or cure of defective mortgage loans or otherwise preserve trust remedies.
NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share
Insurance Fund, insuring the deposits of account holders in all federal credit unions and the overwhelming majority of
state-chartered credit unions. At MyCreditUnion.gov, NCUA also educates the public on consumer protection and financial literacy issues.