By Chris Bruce
Nomura Holdings Inc. and Royal Bank of Scotland Group Plc. can’t escape a $806 million award to federal housing regulators for failing to disclose information about home mortgages in documents for a securities offering, a federal appeals court said Sept. 28. ( FHFA v. Nomura Holding Am. Inc. , 2d Cir., 15-cv-01872, 9/28/17 ).
The 151-page ruling by the U.S. Court of Appeals for the Second Circuit, which could drive up the cost of settlements in other mortgage-backed securities litigation, involves one of several cases brought by the Federal Housing Finance Agency against financial institutions that sold mortgage-backed securities to Fannie Mae and Freddie Mac between 2005 and 2007. The case involving Nomura and RBS was the only one of those cases to go to trial. The FHFA recovered roughly $20 billion in settlements in the other cases.
A district court held for the FHFA in 2015, saying the defendants didn’t correctly describe mortgages that backed securities sold to the government-sponsored enterprises and ordering them to refund $806 million in exchange for certificates purchased by the GSEs.
Nomura and RBS appealed, but the Second Circuit affirmed the lower court’s ruling. Judge Richard C. Wesley, writing for a three-judge panel, said the defendants “failed to discharge their duty under the Securities Act to disclose fully and fairly all of the information necessary for investors to make an informed decision whether to purchase the certificates at issue.”
Among other points, the case has been watched because of the size of the award and its potential to affect settlement talks in other residential mortgage-backed securities (RMBS) litigation. By upholding the district court, the Second Circuit’s decision may encourage plaintiffs in other cases to demand higher settlement amounts.
Nomura spokeswoman Jennifer Will declined to comment on the ruling. RBS spokeswoman Lisa Williams also declined to comment. RBS previously said its exposure in this case was included in RMBS provisioning at the end of 2017’s first quarter.
To contact the reporter on this story: Chris Bruce in Washington at email@example.com
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)