Aug 20 A U.S. appeals court has handed a major
victory to a federal regulatory agency suing big banks over the
sale of toxic mortgage-backed securities to since-failed credit
unions, ruling that the lawsuits were not filed too late.
The 10th U.S. Circuit Court of Appeals in Denver ruled on
Tuesday in favor of the National Credit Union Administration
(NCUA), which could be a boost for the Federal Housing Finance
Agency (FHFA), which is also suing banks over bad mortgage
securities, and quickly seized on the decision.
The 10th Circuit had ruled in August 2013 that lawsuits
filed by the NCUA against the banks, including Royal Bank of
Scotland Group Plc, Nomura Holdings Inc and
Wells Fargo & Co, could move forward, even though they
were filed three years after the toxic securities were sold.
The court ruled that a U.S. law passed in 1989 after the
savings and loan crisis extended the time period that the NCUA
could sue on behalf of credit unions that had been placed into
The NCUA had filed lawsuits in Kansas on behalf of two
failed credit unions, U.S. Central Federal Credit Union and
Western Corporate Federal Credit Union, over securities they
bought for $1.74 billion.
It has filed several similar lawsuits and recovered more
than $1.75 billion in settlements so far.
But in June, the U.S. Supreme Court directed the 10th
Circuit to reconsider its ruling in light of the high court's
decision in an environmental case, CTS v. Waldburger, which
raised similar questions about the timing of lawsuits.
On Tuesday, U.S. Circuit Judge Scott Matheson, writing for a
three-judge panel, reiterated its opinion, saying the
environmental law and the one in the NCUA's case were
"We're pleased with the judges' ruling on this issue, and it
is good news for credit unions," said John Fairbanks, an NCUA
Representatives for the banks either declined comment or did
not immediately respond to requests for comment.
The ruling could help the FHFA, which in 2011 filed 18
lawsuits over mortgage-backed securities bought by mortgage
giants Fannie Mae and Freddie Mac.
The FHFA immediately sent a copy of the ruling on Tuesday to
U.S. District Judge Denise Cote in New York, who is weighing a
similar challenge after the Supreme Court's ruling.
Several banks, including HSBC Holdings Plc, Goldman
Sachs Group Inc and Nomura, had asked Cote to reconsider
an earlier decision that the FHFA was not too late in suing.
Goldman and HSBC are scheduled to go to trial in the FHFA
cases on Sept. 29. A trial in the Nomura case is due to start
Other banks have already settled, enabling the FHFA to
recover $16.1 billion. Goldman has been discussing a settlement
with the FHFA that could cost $800 million to $1.25 billion, a
source told Reuters in July.
The case is National Credit Union Administration Board v.
Nomura Home Equity Loan Inc, 10th U.S. Circuit Court of Appeals,
(Reporting by Nate Raymond in New York; Editing by Jeffrey