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NEW: NCUA Files RMBS Suit Vs. Morgan Stanley
ALEXANDRIA, Va. (8/30/13, UPDATED 12:04 p.m. ET)--The National Credit Union Administration announced today it has filed a new residential mortgage-backed securities (RMBS) case--this one against Morgan Stanley and alleging such things as "systemic disregard of underwriting standards."

"Firms like Morgan Stanley sold securities that turned out to be faulty, triggering a crisis in the credit union industry that has been extremely expensive to contain and repair, and credit unions are still paying the tab," said NCUA Chair Debbie Matz announcing the suit. "All the credit unions we supervise and insure are sharing this burden. The people who are accountable, those who precipitated this crisis, should be required to shoulder that burden, as well."
 
This newest case is in the U.S.  District Court for the District of Kansas. The defendants are Morgan Stanley & Co., Inc., Morgan Stanley ABS Capital I Inc., Morgan Stanley Capital I Inc., and Saxon Asset Securities Co.

It alleges violations of federal and state securities laws in the sale of more than $566 million in mortgage-backed securities to the U.S. Central and WesCorp corporate credit unions, accoding to the NCUA.
 
Although filed Aug. 16, the NCUA announcement of a lawsuit filing comes just three days after the regulator received some good news from the U.S. 10th Circuit Court of Appeals.
 
That court overturned a lower court ruling that claimed the NCUA's RMBS case against RBS Securities was time-barred and should be dismissed.  By overturning that ruling, the appeals court enabled the regulator to proceed with its lawsuits against 12 firms, including RBS Securities, which claim losses stemming from residential mortgage-backed securities sold to corporate credit unions.
 
At the time of that decision, NCUA Chair Debbie Matz said the agency would "continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions. As liquidating agent for the corporate credit unions, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to federally insured credit unions."
 
As noted, the NCUA has filed the RMBS lawsuit as the liquidating agent for the corporate credit unions. Its lawsuits claim that the brokers' offering documents for the RMBS had material misrepresentations about the underlying loans that backed the securities.
 
NCUA has filed lawsuits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual, and Bear Stearns alleging violations of federal and state securities laws in the sale of mortgage-backed securities to the five corporate credit unions.
 
Also, the NCUA has settled similar suits with Bank of America, Citigroup, Deutsche Bank Securities, and HSBC, bringing in more than $335 million in funds that were lost due to the corporate credit union investments. The NCUA has said that funds recovered through these cases will be used to help reduce the amount of future corporate stabilization assessments on credit unions.
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