US regulators sue RBS over mortgage securities

City A.M. Reporter
Royal Bank of Scotland is facing a second lawsuit from US credit union regulators accusing it of misrepresenting mortgage backed securities that it sold.

The latest lawsuit filed by the National Credit Union Administration against RBS Securities Inc seeks over $629m (£391m) in damages, NCUA said in a statement on Monday.

The allegations stem from securities sold to the failed Western Corporate Federal Credit Union. NCUA is the liquidating agent for WesCorp.

RBS spokesman Michael Geller declined to comment on the lawsuit.

According to the NCUA, the lawsuit claims that sellers and underwriters of the mortgage backed securities caused WesCorp to believe the risk associated with the investment was minimal, when it was substantial. The securities experienced greatly declined in value and effectively rendered WesCorp insolvent, NCUA said.

NCUA also previously sued JPMorgan Chase, making the most recent RBS filing its third lawsuit to recover losses from the purchase of securities that caused the failure of five large wholesale credit unions, NCUA said.