A U.S. regulator may proceed with parts of three lawsuits against JPMorgan Chase & Co to recover losses that now-defunct credit unions suffered on billions of dollars of residential mortgage-backed securities, a federal judge in Kansas has ruled.
U.S. District Judge John Lungstrum said the National Credit Union Administration may pursue civil claims that the largest U.S. bank and two companies it bought, Bear Stearns Cos and Washington Mutual Inc, misrepresented the quality of dozens of securities sold to four credit unions in 2006 and 2007.
In a separate decision on Tuesday, the Kansas City-based judge also let the regulator pursue part of a lawsuit against Swiss bank UBS AG over securities sales to two of the credit unions.
The NCUA is pursuing 11 lawsuits as the conservator of five corporate credit unions that suffered losses in the U.S. housing crisis after buying more than $14 billion of mortgage securities.
It said about $7 billion of those securities were traceable to JPMorgan, with about one-half sold or underwritten by Bear, one-third by Washington Mutual and one-sixth by JPMorgan itself. JPMorgan bought Bear and Washington Mutual in 2008.
Tuesday's decisions allowed the NCUA to pursue claims over roughly one-half of the securities in these cases, while dismissing claims over the remainder.
UBS had been sued over more than $1.1 billion of securities, and Lungstrum dismissed claims on roughly two-thirds of these.
JPMorgan spokesman Brian Marchiony declined to comment. UBS spokeswoman Karina Byrne did not immediately respond to requests for comment.
John Fairbanks, an NCUA spokesman, said the regulator is pleased the lawsuits can continue, and that the federal appeals court in Denver is weighing how to apply statutes of limitations on some claims. "NCUA intends to continue to aggressively pursue responsible parties," he said.
The NCUA is based in Alexandria, Virginia. It has reached $335 million of settlements with four banks, the largest being a $165 million accord in April with Bank of America Corp.
One of the five credit unions, the U.S. Central Federal Credit Union of Lenexa, Kansas, had been the nation's largest corporate credit union. Lenexa is a Kansas City suburb.
On August 27, the appeals court said the NCUA may use an "extender" provision in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to pursue some claims that would otherwise be deemed too late.
A similar provision appears in the 2008 Housing and Economic Recovery Act, covering lawsuits by the Federal Housing Finance Agency against JPMorgan, UBS, Bank of America and others as the conservator of Fannie Mae and Freddie Mac.
In April, a federal appeals court in New York interpreted that provision in the FHFA's favor. UBS has since settled with that regulator.
Tuesday's decisions came in cases brought by the National Credit Union Administration Board in the U.S. District Court, District of Kansas, against JPMorgan Securities LLC et al, No. 11-02341; Bear Stearns & Co et al, No. 12-02781; JPMorgan Chase Bank NA as Successor-in-Interest to Washington Mutual Bank et al, No. 13-02012; and UBS Securities LLC et al, No. 12-02591.