Nomura & Royal Bank of Scotland Must Pay $806M in Mortgage-Backed Securities Case

Nomura Holdings (NMR) and Royal Bank of Scotland group Plc (RBS) must pay $806 million in the mortgage-backed securities lawsuit filed against them by the Federal Housing Finance Agency. $779.4 million will go to mortgage lender Freddie Mac (FMCC) while $26.6 million will go to Fannie Mae (FNMA).

Judge Denise L. Cote of the Federal District Court in Manhattan was the one who found the two banks liable for making false statements when selling the securities to the two lending giants. The banks will also take back the mortgage bonds that are the basis of this lawsuit. As of the end of March, these bonds were worth up to $479 million.

It was Nomura that sponsored $2 billion of the securities purchased by Freddie and Fannie. RBS was the underwriter on four of the deals.

FHFA has filed similar claims against other banks, including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC.N), and Deutsche Bank AG (DB). It’s obtained close to $17.9 billion in settlements from the financial institutions. RBS and Nomura opted to go to trial instead of settle.

Judge Cote said that the two banks committed falsities that were “enormous.” The FHFA accused both institutions of cheating Freddie and Fannie by selling them defective mortgage bonds. Meantime, RBS and Nomura had countered that the documents for the bond sales did a good enough job of pointing out the risks and did not mislead investors. They said the financial crisis, rather then their alleged misstatements, were responsible for the two mortgage lenders’ financial losses.

When financial firms and their representatives make mispresentations or ommissions about the securities they are selling, this can lead to huge losses for investors, which can be devastating if their portfolios aren’t able to handle the risks. Unfortunately, that is what happened with investors of mortgage-backed securities leading up to the 2008 financial crisis. Even now, there are individual and institutional investors that are trying to get their money back.

At Shepherd Smith Edwards and Kantas, LTD LLP, our mortgage-backed securities lawyers are here to help investors with their claims and lawsuits. We have the experience and resources to go up against large banks, investment advisory firms, and others. Contact us today.

Nomura, RBS must pay $806 million in mortgage bond case – U.S. judge, Reuters, May 15, 2015

Federal Housing Finance Agency