NEW YORK (6/26/13)--Attorneys for Residential Capital have asked a federal bankruptcy court in New York to deny more than $200 million in claims filed by the National Credit Union Administration related to losses from residential mortgage backed securities (RMBS) sold to Western Corporate FCU and U.S. Central FCU.
ResCap filed its objection to NCUA's claims with the court on June 20, seeking to "disallow and expunge the claims filed" by NCUA on behalf of the two corporates, which NCUA liquidated on March 20, 2009. NCUA had brought the claims as the corporates' liquidating agent.
NCUA filed 11 proofs of claim for about $200 million, according to the court document .Roughly 6,839 proofs of claim have been filed against the company in its Chapter 11 bankruptcy cases.
In suits filed in Kansas and California, NCUA argued that RMBS issuers and underwriters, including Residential Accredits Loans and Residential Funding Mortgage Securities II, abandoned underwriting standards and made misstatements in the funds' offering materials about the safety of the investments.
"The NCUA claims are untimely; the NCUA cannot allege--let alone prove--any material misstatement in the offering materials; and the credit unions' losses were caused by a market-wide collapse, not by any misstatement by the debtors," said ResCap's objection document.
ResCap argued that NCUA's claims don't meet the statute of limitations for filing a claim, that its complaints "contain no particularized factual allegations linking the NCUA's generalized theory about abandonment of underwriting standards to the specific RMBS securities the credit unions purchased, and said the corporates' losses were not caused by the revelation of any alleged misstatement."
It urged the court to "reject the NCUA's belated attempt to recover from the debtors (at the expense of the debtors' other creditors) for losses that highly sophisticated RMBS investors suffered when their ill-timed and risky bets went wrong."
NCUA has until July 12 to respond. A hearing date is set for July 24.