A U.S. District Court judge stated Nomura Holdings Inc. wasn’t honest about details related to mortgage-backed securities sold to Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie Mae, representing a victory for the Federal Housing Finance Agency. The judge asked company’s conservator to propose update compensation to be paid by Nomura and RBS Securities Inc. The co-defendant underwrote a part of the investments. At the beginning of the case, the regular has asked for almost $1.1 billion.
The implications
The order resulted to an end of a rare trial addressing suspected mortgage-related infractions done during the housing boom. As a matter of fact, in a matter of few years, several firms opted to settle similar allegations rather than going for a court battle. The settlements have resulted in Freddie and Fannie to collect $18 billion in penalties. In the verdict, the judge stated that Nomura in providing credentials for mortgage-backed securities offer to Federal Home Loan and Fannie didn’t accurately disclosed the loans’ quality. The degree of falsity, conservatively considered, is enormous.
The investment
During the boom, Federal Home Loan and Fannie invested enormous amount of funds in mortgage-backed securities released by firms like Nomura. Those investments supported profits but, in the financial bust, accounted for sharp losses that eventually prompted government to take over the two mortgage firms in 2008.
RBS and Nomura were two of eighteen financial institutions targeted in 2011 by the regulator FHFA, which stated that the companies didn’t provided complete information about the quality of the loans. During the nonjury trial, lawyers said that RBS and Nomura inflated values of homes behind some securities.
In last trading session, the stock price of FMCC declined more than 1% to close the trading session at $2.73. The decline came at a share volume of 1.76 million compared to average share volume of 2.55 million.
