A U.S. judge has drawn conclusion that Nomura Holdings Inc. ADR (NYSE:NMR) was behind misleading Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC). The Judge passed a ruling observing that its was Nomura’s hand in selling defective mortgage-backed securities to the two housing companies.
The ruling comes as a relief to the Federal Housing Finance Agency, the conservator of the two companies, which might recover as much as $450 million in damages from Nomura now. Calling the actions of Nomura and Royal Bank of Scotland as ‘deceptive’, the judge said that the intensity of the false statements by them is enormous when measured on a conservative basis. It is to be noted that Nomura and Royal bank of Scotland Plc, underwrote $2 billion in mortgage-backed securities and later sold it to Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie by making false misstatements in the offering documents.
Arguments in support
Meanwhile, the FHFA has expressed content with the ruling as the regulator took both Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac in conservatorship following the financial crisis. The FHFA General Counsel commented that the ruling established that the facts presented by them were true and convincing.
On the other hand, Nomura has said that it will appeal the ruling as it takes its dealings with Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie as transparent and professional. Nomura argued that the losses to Fannie and Freddie were as a result of the overall market condition during that time and not banks’ fault. However, the judge said that the mortgage securities sold to the housing companies failed in the underwriting process itself, with nearly 45-59% identified as materially defective mortgages.
The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) was down by 1.44% to $2.73 during the previous trading session as 2.55 million shares changed hands.