Risk & Compliance

RBS Agrees to $1.1B Settlement of MBS Claims

The regulator of federal credit unions has now recovered $4.3 billion from financial institutions over sales of toxic mortgages.
Matthew HellerSeptember 28, 2016

Royal Bank of Scotland Group has agreed to pay $1.1 billion to settle claims arising out of its sales of toxic mortgage-related securities to two corporate credit unions.

Western Corporate Federal Credit Union and U.S. Central Federal Credit Union both collapsed as a result of the mortgage meltdown. As their liquidating agent, the U.S. National Credit Union Administration sued RBS and other banks for selling faulty mortgages to the credit unions.

The settlement announced Tuesday between RBS and the NCUA brings the regulator’s recoveries against financial institutions over MBS sales to $4.3 billion.

“NCUA is pleased with today’s settlement and fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis,” NCUA Board Chairman Rick Metsger said in a news release.

A federal judge had denied RBS’ motion to dismiss the case, finding the NCUA did not wait too long to bring the suit.

In a previous deal, RBS in 2015 agreed to pay $129.6 million to resolve similar NCUA claims involving mortgage sales to two other credit unions, Southwest Corporate and Members United Corporate.

The bank in January said it had set aside 3.8 billion pounds ($4.95 billion) to resolve civil lawsuits over mortgage-backed securities, investment products packaged and sold before the U.S. housing meltdown, but according to Reuters, some analysts estimate the total claims will be much larger.

RBS still faces about 13 other lawsuits related to alleged improper sales of asset-backed securities and a multi-billion dollar suit by the U.S. Federal Housing Finance Agency, acting as the conservator for mortgage giants Fannie Mae and Freddie Mac.

Wescorp and U.S. Central owned more than $1.7 billion in mortgage-backed securities. The NCUA is continuing to pursue MBS-related litigation against other financial institutions, including Credit Suisse and UBS.

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