The agency that oversees federal credit unions has sued Wells Fargo for allegedly failing to protect investors while acting as trustee over securities backed by home loans that defaulted after the 2008 credit crisis.
The National Credit Administration Union Board’s complaint, filed Monday in federal court in Manhattan, follows a similar action taken by the regulator against Charlotte-based Bank of America and U.S. Bancorp last week. The cases are based on the same allegations and legal theory as suits filed in June against trustees by mortgage-bond investors including BlackRock and Pacific Investment Management.
Wells Fargo, as trustee for 27 trusts that issued residential mortgage-backed securities, failed to review loan files for irregularities and ignored signs of trouble with the trusts, which suffered “enormous losses due to the high number of mortgage defaults, delinquencies and foreclosures caused by defective loan origination and under writing,” according to the complaint.
“Even after ample evidence came to light that the trusts were riddled with defective loans, defendant shut its eyes to such problems and failed to take the steps necessary to protect the trusts and certificate holders,” the board said in the suit.
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Wells Fargo said in a statement that it strongly disagrees that the San Francisco-based bank is “in any way responsible for any losses incurred on these transactions.”
Pools of home loans securitized into bonds were central to the housing bubble that helped send the U.S. into the worst recession since the 1930s. The housing market collapsed and demand for the securities evaporated.
Wells, which acquired Wachovia in 2008, employs about 22,100 in Charlotte. Staff writer Rick Rothacker contributed.