The U.S. Court of Appeals for the Ninth Circuit recently reversed a trial court’s dismissal of the National Credit Union Administration’s (NCUA’s) residential mortgage-backed securities (RMBS) fraud claims against Nomura Home Equity Loan Inc. The appellate court held that the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) extended all applicable deadlines for the NCUA to file any suit in its capacity as conservator or liquidating agent for a troubled credit union. Among many other reforms, FIRREA included an “extender” provision that allows the NCUA to bring claims that would otherwise be barred by applicable statutes of limitation and statutes of repose. Similar statutes govern claims brought by the Federal Deposit Insurance Corporation (FDIC) as conservator or receiver for a failed bank, as well as claims brought by the Federal Housing Finance Agency (FHFA) as conservator or receiver for government-sponsored entities such as Fannie Mae and Freddie Mac.
Specifically, the Ninth Circuit held that the extender provision of FIRREA applies to both statutes of limitation, which set forth deadlines by which plaintiffs must file suit, and related statutes of repose, which set absolute deadlines after which defendants may not be sued. Thus, the NCUA’s claims, although filed in 2011, more than three years after the subject RMBS were purchased in 2006 and 2007, were still timely.
The NCUA brought the underlying suit on behalf of Western Corporate Credit Union (WesCorp), which originally purchased the securities at issue. The complaint alleges that Nomura and other defendants falsely represented to WesCorp that these RMBS were low risk, while knowing and failing to disclose that the mortgage loans underlying the RMBS failed to meet applicable underwriting standards, in violation of Section 13 of the Securities Act of 1933. Because WesCorp was placed into NCUA conservatorship following its failure in 2009, the appellate court concluded that NCUA’s 2011 suit was well within the three-year statute of limitations. The Ninth Circuit’s holding follows similar rulings interpreting extender statutes by its sister courts, the Second Circuit, Fifth Circuit, and Tenth Circuit.