WICHITA, Kan. (12/4/12)--The National Credit Union Administration (NCUA) has asked a federal court in Kansas to reject JP Morgan Chase's request for a stay of NCUA's lawsuit against the Wall Street Bank over mortgage backed securities (MBS) sold to four corporates, including U.S. Central FCU and Western Corporate FCU.
JP Morgan Securities, JP Morgan Acceptance Corp. I, and Bond Securitization LLC--all units of JP Morgan--had filed the motion to stay the case until an appeals court in the 10th Circuit had decided issues in a similar case NCUA had filed against RBS Securities.
The issues under appeal involve an extender statute, which sets statutes of limitations and statutes of repose--deadlines that affect when lawsuits may or may not be filed. Several banks have claimed NCUA did not file its MBS cases early enough.
NCUA filed its opposition to JP Morgan's motion on Friday in the U.S. District Court for the District of Kansas, saying that delaying the case would prevent NCUA from expeditiously vindicating its claims, would likely result in prejudice impacting its ability to obtain critical materials from third parties such as loan originators, and would potentially delay any potential payment of damages to credit unions.
"JP Morgan has failed to meet its burden to justify a wholesale stay of this litigation," said NCUA's opposition motion. "The bulk of this case is outside the scope of the RBS appeal, and regardless of the outcome of that appeal, this court will be required to move forward on most of the claims in the complaint," said NCUA. It's motion also noted that "no defendant in any other NCUA case has made a similar motion."
NCUA pointed out that courts consider five factors in assessing a motion to stay: the plaintiff's interest in proceeding expeditiously and without potential prejudice; the burden on defendants; the convenience of the court; the interests of persons who are not parties in the litigation, and the public interest.
JP Morgan issued and underwrote securities to the corporates from 2006 to 2007. The corporates collapsed in 2009, and NCUA, as their liquidating agent, sued a number of Wall Street banks who issued or underwrote the securities that contributed to the corporates' collapse.
NCUA's lawsuits, including the one against JP Morgan, allege the banks made numerous misrepresentations and omissions of material facts in the documents offered the failed corporates. The agency alleges systemic disregard of underwriting guidelines stated in the offering documents and says the alleged misrepresentations caused U.S. Central and WesCorp to believe the risk of loss on the investments was minimal, when in fact, the risk was substantial.
In addition to JP Morgan and RBS Securities, NCUA has filed lawsuits against Wachovia Capital Markets and Wells Fargo, Barclay's Capital Inc., Goldman Sachs, and UBS Securities. The agency has already settled claims of more than $170 million with Citigroup, Deutsche Bank Securities and HSBC.