NCUA Sues JPMorgan over $2.2B in WaMu Securities

The ""National Credit Union Administration"":http://www.ncua.gov/Pages/default.aspx (NCUA) filed its 10th action against a major Wall Street investment firm--this time, the defendant is ""JPMorgan Securities"":http://www.jpmorgansecurities.com/pages/am/securities/home.

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NCUA's suit revolves around mortgage-backed securities (MBS) underwritten and sold by Washington Mutual Bank (WaMu), which was acquired by JPMorgan in 2008 following its collapse.

According to NCUA's ""complaint"":http://www.ncua.gov/News/Press/NW20130104MorganComplaint.pdf, WaMu misrepresented the underwriting quality of $2.2 billion in MBS sold to U.S. Central, Western Corporate, and Southwest Corporate federal credit unions. All three corporate credit unions became insolvent and were placed into NCUA conservatorship and liquidated.

The complaint alleges that underwriting guidelines described in the offering documents for the MBS sales were ""systematically abandoned"" and led the credit unions to believe the risk involved was minimal.

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The complaint goes on to allege that WaMu inflated the salaries of loan applicants and accepted unofficial documents as verification of employment, citing a 2008 report from the _New York Times_ that described in detail ""the relentless pressure to churn out loans ... while disregarding borrowers' incomes and assets.""

Other defendants named in the complaint include WaMu Capital Corp., Long Beach Securities Corp., and WaMu Asset Acceptance Corp.

""The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair, and that job isn't finished, yet,"" said NCUA board chairman Debbie Matz. ""All the credit unions we supervise and insure have had to share this burden, so it's only right that the people who caused the damage be required to pick up that burden, as well.""

The lawsuit is not NCUA's first action against JPMorgan Securities. The agency filed suit against the bank in June 2011 for damages related to its own securities and ""again"":https://themreport.com/articles/ncua-files-largest-suit-yet-against-jpmorgan-bear-stearns-2012-12-18 in December 2012 for losses related to Bear Stearns.

A representative for JPMorgan Chase did not immediately return a request for comment.

NCUA has similar actions pending against Barclays Capital, ""Credit Suisse"":https://themreport.com/articles/ncua-targets-credit-suisse-over-faulty-mortgage-backed-securities-2012-10-05, Goldman Sachs, and UBS, to name a few. To date, the agency has settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities, and HSBC.