WICHITA, Kan. (2/28/12)--A federal judge Monday granted Wachovia Capital Markets an extension to file a response to the National Credit Union Administration's (NCUA) complaint in a lawsuit over residential mortgage-backed securities (RMBS) sold to corporate credit unions.
Wachovia has until April 4 to respond to NCUA's complaint in the U.S. District Court for the District of Kansas, Wichita. The consent order was signed by Magistrate Judge Kenneth G. Gale.
On Jan. 31 Judge Julie A. Robinson ordered the NCUA to show cause why NCUA's lawsuit against Wachovia Capital Markets LLC (now known as Wells Fargo Securities LLC) over RMBS sold to corporate credit unions should not be dismissed for lack of prosecution (News Now Feb. 6).
NCUA filed a response to the show-cause order with the court Feb. 22 , in which NCUA said it served Wachovia within the timeframe allowed by federal rules and worked with the bank on an extension of times for a response to NCUA's complaint.
NCUA also said Wachovia's original deadline was well within the 120 days allowed for service process, with no undue delays or prejudice to Wachovia.
Wachovia and NCUA on Feb. 22 filed a mutual consent motion for extension of time for Wachovia to file a response to NCUA's complaint.
The lawsuit alleges that originators of the RMBS had systematically abandoned the stated underwriting guidelines, resulting in riskier RMBS that the corporates would not have bought, had they known, said NCUA. Wachovia representatives sold about $100 million in RMBS to U.S. Central and WesCorp in 2006, and U.S. Central purchased approximately $80 million in RMBS underwritten by Wachovia, according to court documents (News Now Feb. 6).
NCUA placed U.S. Central and WesCorp into conservatorship on March 20, 2009. On Oct. 1, 2010, the corporates were placed into involuntary liquidation. NCUA is suing as the liquidating agency to recoup some of the losses.