HSBC Settles with NCUA for $5.25M in MBS case (Misc News: March 12, 2012)
The NCUA and HSBC have reached a settlement regarding potential claims relating to the sale of residential mortgage-backed securities to five failed wholesale credit unions.
HSBC has agreed to pay NCUA $5.25 million to reduce the losses associated with the five failures. The settlement with HSBC does not admit fault on its part. So far, it has collected $170.75 million in settlement proceeds. In addition to the settlement with HSBC, NCUA reached earlier settlements of $145 million with Deutsche Bank Securities and $20.5 million with Citigroup.
“We appreciate HSBC’s efforts to resolve potential claims so that we can avoid the expense and delay of litigation,” said NCUA board Chair Debbie Matz. “This settlement furthers our goal to minimize losses and thereby reduce the assessments that all credit unions will have to pay.”
NCUA will use the net proceeds from this settlement to further reduce assessments being charged to credit unions to pay for the losses.
Losses from wholesale credit union failures are paid from the Temporary Corporate Credit Union Stabilization Fund. Expenditures from this fund must be repaid through assessments against all federally insured credit unions. Thus, recoveries such as this settlement reduce the amount of future assessments on credit unions.
Since 2009, NCUA has assessed credit unions $3.3 billion to pay for losses associated with the five corporate credit union failures. Given the current settlement proceeds, projections for remaining assessments range between $1.8 billion and $6.1 billion that must be paid by 2021.