On May 1 and 3, UBS Securities LLC and Credit Suisse Securities USA LLC announced settlements of significant claims brought against them by the National Credit Union Administration (“NCUA”), the federal agency serving as liquidation agent for credit unions that folded during the economic crisis. Credit Suisse will pay $400 million and UBS $445 million to settle the NCUA claims.

The NCUA brought RMBS fraud claims against Credit Suisse, alleging that the bank made false and misleading statements about the quality of the mortgage loans underlying the RMBS it sold to three credit unions that later failed. In January, Judge John W. Lungstrum of the District of Kansas denied the NCUA’s motion for summary judgment, holding that there were triable issues of fact concerning whether the bank’s due diligence with respect to the mortgage loans could be a defense to the NCUA’s allegations.

Similar to its claims against Credit Suisse, the NCUA alleged that UBS made false and misleading statements in underwriting and selling RMBS to the U.S. Central Federal Credit Union and the Western Corporate Federal Credit Union. Those two defunct entities were the largest corporate credit unions in the country before being placed under NCUA conservatorship, largely due to losses on mortgage-backed securities. The NCUA alleged, among other things, that the originators of the mortgages underlying the UBS-sponsored RMBS “systematically abandoned” underwriting guidelines, resulting in significantly higher risk for the RMBS than indicated by its AAA ratings.

Including these recoveries, the NCUA has now amassed more than $5 billion in settlements from Wall Street banks stemming from the collapse of corporate credit unions that invested in toxic RMBS. The cases are National Credit Union Administration Board v. Credit Suisse Securities USA LLC et al., number 12-cv-2648, and National Credit Union Administration v. UBS Securities LLC, number 12-cv-02591, both venued in the District of Kansas.

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