In the lawsuit, the National Credit Union Administration (NCUA) claims U.S. Bank and Bank of America broke state and federal laws by failing their duties as trustees for 99 residential mortgage-backed securities trusts, according to Reuters
The banks sold $5.8 billion in securities to five corporate credit unions that later failed after the products lost value, according to the lawsuit. The regulator also accused U.S. Bank and Bank of America of knowing about defects in the mortgages but not providing required notices to the investors, reported Reuters.
"U.S. Bank and Bank of America had obligations under federal and state law, and they failed to live up to those obligations," said NCUA Chairman Debbie Matz in a statement.
A U.S. credit union regulator has filed a lawsuit against two major banks over shoddy mortgage securities they sold during the run-up to the financial meltdown.