The U.S. Supreme Court told a federal appeals court to reconsider whether the NCUA can move forward with lawsuits against big banks the NCUA said knowingly sold bad mortgage backed securities to failed corporates.
The court on June 16 granted a writ of certiorari petition to defendant Nomura Home Equity Loan, et. al., vacating judgment and remanding the case back to the 10th Circuit Court in Denver, according to the order posted on the court's website.
At issue are the legal time limits in which plaintiffs must file such suits and similar limits under which defendants are forced to answer legal claims. The bank defendants have claimed those windows expired before the NCUA filed suit, citing the dates corporates purchased the mortgage backed securities as when the clock began ticking. The NCUA has argued the window began when it seized failed corporates in 2009 and 2010.
The 10th Circuit Court in Denver sided with the NCUA in a 2013 appeals case. The Supreme Court directive came after it reviewed similar time limitations in a different case and more clearly defined when delay periods can be applied to statutes of repose.
Although the Supreme Court's decision could potentially influence the 10th Circuit to reverse its decision and side with bankers, CUNA EVP and General Counsel Eric Richard said the book is not closed on the NCUA's case.
"The Supreme Court asked the 10th Circuit to look at its decision in the context of another decision the Supreme Court issued last week in a completely different area of law, the environmental context. The 10th Circuit can still decide it got it right the first time," he said in a statement.
And, Richard said, even if the NCUA loses ground in Denver, the regulator still has many other opportunities, both before the 10th Circuit and potentially the Supreme Court itself, to argue its cases should proceed.
"Even if the NCUA is ultimately unsuccessful on this issue, there are still other claims against these same defendants that should be unaffected. Those other claims would still offer the possibility of recovering money on behalf of credit unions," he said.
The NCUA was the first federal financial regulator to sue big banks for deceiving investors that purchased mortgage backed securities underwritten during the housing boom, when individual mortgages underlying the securities were overvalued.
So far, the NCUA has settled with some big bank defendants for more than $1.75 billion; net proceeds have offset corporate losses and reduced corporate assessment payments made by federally insured credit unions.
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