Regulation

NCUA to receive $1.42 billion in JPMorgan settlement over faulty MBS

resized_NCUA_SEALThe National Credit Union Administration joined several other governmental plaintiffs in a $13 billion settlement with JPMorgan Chase—of which it will receive $1.42 billion—over the sale of faulty mortgage-backed securities.

The settlement resolves four suits filed by NCUA against JPMorgan, Bear Stearns and Washington Mutual for credit union losses resulting from the purchase of the faulty securities.

“All this really comes down to holding responsible parties accountable,” NCUA Chairman Debbie Matz said. “In agreeing to this settlement, the world’s largest bank has taken a measure of responsibility for actions that caused severe damage to the credit union system. NCUA remains committed to fulfilling our statutory responsibilities to protect the credit union system by pursuing further recoveries against other Wall Street investment firms on behalf of credit unions and their members.”

NCUA was the first regulator to recover losses resulting from the sale of faulty MBS on behalf of failed financial institutions.

In 2008, faulty MBS purchased by five corporate credit unions plummeted in value, ultimately contributing to the institutions’ failures that left the entire credit union system with billions in losses. When the failed corporate credit unions initially purchased the securities, a majority had triple-A ratings but have since been downgraded.

NCUA has settled claims worth over $335 million with Citigroup, Deutsche Bank Securities, HSBC and Bank of America. The JPMorgan settlement brings the total assets recovered by the NCUA from Wall Street banks and investment firms to $1.75 billion.

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