* Banks said to misrepresent quality of mortgage securities
* Some National Credit Union Administration claims dismissed
By Jonathan Stempel
Sept 4 A U.S. regulator may proceed with parts
of three lawsuits against JPMorgan Chase & Co to recover
losses that now-defunct credit unions suffered on billions of
dollars of residential mortgage-backed securities, a federal
judge in Kansas has ruled.
U.S. District Judge John Lungstrum said the National Credit
Union Administration may pursue civil claims that the largest
U.S. bank and two companies it bought, Bear Stearns Cos and
Washington Mutual Inc, misrepresented the quality of dozens of
securities sold to four credit unions in 2006 and 2007.
In a separate decision on Tuesday, the Kansas City-based
judge also let the regulator pursue part of a lawsuit against
Swiss bank UBS AG over securities sales to two of the
The NCUA is pursuing 11 lawsuits as the conservator of five
corporate credit unions that suffered losses in the U.S. housing
crisis after buying more than $14 billion of mortgage
It said about $7 billion of those securities were traceable
to JPMorgan, with about one-half sold or underwritten by Bear,
one-third by Washington Mutual and one-sixth by JPMorgan itself.
JPMorgan bought Bear and Washington Mutual in 2008.
Tuesday's decisions allowed the NCUA to pursue claims over
roughly one-half of the securities in these cases, while
dismissing claims over the remainder.
UBS had been sued over more than $1.1 billion of securities,
and Lungstrum dismissed claims on roughly two-thirds of these.
JPMorgan spokesman Brian Marchiony declined to comment. UBS
spokeswoman Karina Byrne did not immediately respond to requests
John Fairbanks, an NCUA spokesman, said the regulator is
pleased the lawsuits can continue, and that the federal appeals
court in Denver is weighing how to apply statutes of limitations
on some claims. "NCUA intends to continue to aggressively pursue
responsible parties," he said.
The NCUA is based in Alexandria, Virginia. It has reached
$335 million of settlements with four banks, the largest being a
$165 million accord in April with Bank of America Corp.
One of the five credit unions, the U.S. Central Federal
Credit Union of Lenexa, Kansas, had been the nation's largest
corporate credit union. Lenexa is a Kansas City suburb.
On Aug. 27, the appeals court said the NCUA may use an
"extender" provision in the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 to pursue some claims that
would otherwise be deemed too late.
A similar provision appears in the 2008 Housing and Economic
Recovery Act, covering lawsuits by the Federal Housing Finance
Agency against JPMorgan, UBS, Bank of America and others as the
conservator of Fannie Mae and Freddie Mac.
In April, a federal appeals court in New York interpreted
that provision in the FHFA's favor. UBS has
since settled with that regulator.
Tuesday's decisions came in cases brought by the National
Credit Union Administration Board in the U.S. District Court,
District of Kansas, against JPMorgan Securities LLC et al, No.
11-02341; Bear Stearns & Co et al, No. 12-02781; JPMorgan Chase
Bank NA as Successor-in-Interest to Washington Mutual Bank et
al, No. 13-02012; and UBS Securities LLC et al, No. 12-02591.