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33 » VISIT US ONLINE @ DSNEWS.COM JUDGE FINDS NOMURA LIABLE FOR SELLING TOXIC MORTGAGE-BACKED SECURITIES e nearly two-month court battle between the Federal Housing Finance Agency (FHFA) and Nomura Holdings came to an end when a federal judge found the bank liable for selling shoddy mortgages to Fannie Mae and Freddie Mac prior to the 2008 financial crisis. In a 361-page ruling, Judge Denise Cote said the magnitude by which Nomura and co-defendant Royal Bank of Scotland (RBS) deceived the GSEs regarding the mortgage- backed securities was "enormous." "FHFA is pleased with the Court's decision and we are reviewing the various elements of this important ruling. It is clear the Court found that the facts presented by FHFA were convincing," FHFA General Counsel Alfred Pollard said. "FHFA looks forward to submitting proposed damages calculated under the formulae applied in the Court's Opinion." e non-jury trial began March 16 in the U.S. District Court in the Southern District of New York in Manhattan with Cote presiding. Nomura and RBS are the first two financial institutions out of 18 the FHFA sued in 2011 that failed to reach a settlement and took the case to trial. FHFA sued the 18 institutions to recoup U.S. taxpayer costs following the government's $188 billion bailout of Fannie Mae and Freddie Mac in 2008, after which the government seized control of both enterprises. FHFA seeks $1.1 billion in damages. e agency alleges it suffered monumental losses when the sponsor of the mortgage- backed securities, Nomura, and the securities' underwriter, RBS, did not follow underwriting guidelines on 68 percent of a sample of a bundle of securities backing more than $2 billion worth of mortgages sold to the GSEs prior to the financial crisis of 2008. An attorney for Nomura claimed during the trial the losses incurred by the FHFA were due to macroeconomic factors and not false or misleading statements by the banks, while an attorney for FHFA accused Nomura and RBS of "colossal incompetence" and "deceit" with regards to the documents for the mortgage- backed securities they sold to the GSEs. e FHFA has a separate suit pending against RBS in the U.S. District Court in Connecticut over the selling of about $32 billion worth of faulty mortgage-backed securities to Fannie Mae and Freddie Mac before the crisis. e bank set aside about $3 billion for a possible settlement, but reports surfaced that the FHFA might ask as much as $7.7 billion. e case should go to trial sometime next year if a settlement is not reached. In June 2014, RBS agreed to pay $99.5 million to settle a separate FHFA suit claiming the bank sold more than $2 billion worth of faulty mortgage-backed securities to Fannie Mae and Freddie Mac between 2005 and 2007, the years of the "housing bubble" in the United States.

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