information:highlighting
2015 ruling

On May 11, 2015 The Wall Street Journal reported that A U.S. District Court judge said Nomura Holdings Inc. was not truthful in describing mortgage-backed securities sold to Fannie Mae and Freddie Mac, giving a victory to the companies' conservator, the Federal Housing Finance Agency (FHFA). Judge Denise Cote asked the FHFA to propose updated damages to be paid by Nomura and co-defendant RBS Securities Inc., which underwrote some of the investments. At the outset of the case, the FHFA asked for about $1.1 billion. The order brought to conclusion a rare trial addressing alleged mortgage-related infractions committed during the housing boom. Over the past few years, more than a dozen firms chose to settle similar allegations brought by the FHFA rather than face a court battle. The settlements have brought Fannie and Freddie $18 billion in penalties. In her decision, Judge Cote wrote that Nomura, in offering documents for mortgage-backed securities sold to Fannie and Freddie, didn't accurately describe the loans' quality. "The magnitude of falsity, conservatively measured, is enormous", she wrote. During the boom, Fannie and Freddie invested billions of dollars in mortgage-backed securities issued by such companies as Nomura. Those investments bolstered profits but, in the bust, contributed to steep losses that ultimately resulted in the companies' 2008 government takeover. Nomura and RBS were two of 18 financial institutions, including Bank of America Corp. and Goldman Sachs Group Inc., targeted in 2011 by the FHFA, which alleged that the companies lied about the quality of the loans underlying the securities. During the nonjury trial, lawyers for the FHFA said that Nomura and RBS inflated values of homes behind some mortgages and sometimes said a home was owner-occupied when it was not.