By Jonathan Stempel
NEW YORK, July 21 (Reuters) - A federal judge rejected HSBCHoldings Plc's bid to dismiss a U.S. lawsuit claimingthat its failure to perform its duties as trustee for $2.37billion of residential mortgage-backed securities contributed tothe downfall of five federal credit unions.
U.S. District Judge Shira Scheindlin in Manhattan on Mondaynight said the National Credit Union Administration had standingto sue even though most of the debt had been resecuritized, andthe new trustee refused to sue HSBC on its behalf.
The lawsuit is one of many in which the NCUA is seeking torecover investment losses that led to the 2009 and 2010 failuresof the U.S. Central, Western Corporate, Constitution Corporate,Members United Corporate and Southwest Corporate credit unions.
Some lawsuits targeted banks that allegedly sold securitiesbacked by defective residential mortgages. Other lawsuitstargeted trustees who allegedly failed to monitor loan servicersor to require banks to buy back defective loans.
HSBC spokeswoman Juanita Gutierrez declined to comment.
Scheindlin rejected HSBC's argument that the March 20lawsuit concerning its oversight of 37 RMBS trusts dating from2004 to 2007 came too late, having been filed six years afterthe first two credit unions failed.
She also said the NCUA could still pursue claims as thecredit unions' "conservator" or "liquidating agent," despitehaving resecuritized their distressed mortgage securities andguaranteed payments on the newly issued notes.
The NCUA did this "to fulfill its governmental purpose ofstabilizing the credit union system," Scheindlin wrote. "Itseems perverse to conclude, based on these actions, that NCUA isnot bringing suit as a conservator or liquidating agent, simplybecause it took this extra step."
Bond issuers appoint trustees to ensure that payments arefunneled to investors, as well as to handle much of theback-office work after securities are sold.
In May, U.S. District Judge Katherine Forrest in Manhattandismissed a similar NCUA lawsuit against Bank of America Corp and US Bancorp over 74 RMBS trusts, noting that securities there had been resecuritized.
Scheindlin said she disagreed with part of Forrest's ruling,but that the case could also be distinguished on its facts. TheNCUA filed an amended complaint against Bank of America and USBancorp last week.
The case is National Credit Union Administration Board vHSBC Bank USA NA, U.S. District Court, Southern District of NewYork, No. 15-02144. (Reporting by Jonathan Stempel in New York; Editing by PhilBerlowitz)