The Securities Industry and Financial Markets Association said in an amicus brief filed on Friday that the NCUA’s lawsuits against Wall Street over the sale of mortgage-backed securities to corporate credit unions should be reversed.
SIFMA’s brief was filed in a U.S. court of appeals, which is reviewing whether the NCUA filed its lawsuit against RBS Securities within the statute of repose and whether the agency should be allowed to extend the statute of repose. In July 2011, a U.S. district court in Kansas ruled that NCUA could proceed with its suit against RBS and other banks.
SIFMA said in the brief that NCUA did not file suit against the banks within the three-year statute of repose but used an extender statute that prolongs the time period in which it is allowed to file a suit. SIFMA said, however, that the extender statute “clearly and unambiguously does not apply to statutes of repose because it does not even mention them.”
“This case has far-reaching significance not only for SIFMA’s members but also for the securities industry as a whole,” the brief said. “The NCUA, the FDIC and the Federal Housing Finance Agency have commenced more than 20 actions against financial institutions concerning the sale of more than $200 billion of residential mortgage-backed securities and seek to apply the same or similar extender statutes to Securities Act claims based on the same incorrect construction [used in the July 2011 decision].”
SIFMA said that the Kansas court failed to “follow the plain language of the Extender Statute and to recognize that it modifies only ‘the applicable statute of limitations’ for the NCUA’s claims” and not the statute of repose.
In addition to RBS, NCUA has filed suits against Wachovia Capital Markets, Wachovia Mortgage Loan, Goldman Sachs, JPMorgan Chase, UBS Securities, Barclay’s Capital and Credit Suisse Securities, saying that they misrepresented and failed to divulge crucial information to five corporate credit unions in a “systemic disregard of underwriting guidelines.”