According to a complaint filed by the regulator, National Credit Union Administration (NCUA), the two unions, US Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp) had paid more than US$1.1 billion for the securities in 2006 and 2007.
NCUA, in the lawsuit stated that at the time of purchase, US Central and WesCorp "were not aware of the untrue statements or omissions of material facts" in the offering documents of the residential mortgage-backed securities (RMBS).
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It further added that the misrepresentations in the offering documents had caused US Central and WesCorp to believe the risk of loss was minimal, when in fact the risk was substantial.
"The RMBS’s substantial loss of market value has injured US Central, WesCorp and the NCUA Board," the regulator stated in the court papers and has asked the court for a jury trial in the case.
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