Nomura Holdings (NMR) is about go where no big bank, not Citigroup (C), JPMorgan Chase (JPM), or Bank of America (BAC), has gone before — to a courtroom to face off against the Federal Housing Finance Agency to fight a toxic mortgage lawsuit.
On Monday, Nomura will take its fight against the FHFA to court after refusing to settle because it claims that its U.S. unit did not knowingly sell bonds backed by fraudulently originated loans to Fannie Mae and Freddie Mac in the run-up to the financial crisis.
In the last few months, some of the country’s biggest banks have settled with the federal government over toxic residential mortgage-backed securities, including Bank of America, which settled with the Department of Justice for $16.65 billion, JPMorgan Chase, which settled for $13 billion, and Citigroup, which settled for $7 billion.
But Nomura is determined to fight back against the FHFA’s claims and will take that fight to a Manhattan federal court on Monday, according to a report from Reuters.
The FHFA said Japan's Nomura, the securities' sponsor, and RBS, an underwriter, misstated important details of the mortgages underlying more than $2 billion in securities sold to Fannie and Freddie, which came under government control amid the economic upheaval seven years ago.
The FHFA says that 68% of a sample of the loans were not underwritten in accordance with underwriting guidelines and that appraised values were inflated on average by 11.1 percent.
Nomura and RBS deny the allegations, arguing no misleading statements were made and any false statements were immaterial.
The FHFA is seeking more than $1 billion. If the banks have to pay damages, they would receive the mortgage bonds in exchange, which earlier this week were valued at $480 million.
According to a previous report, Nomura’s penalty is estimated not to exceed $300 million, which pails in comparison to the penalties paid by BofA, Chase and Citi, but that’s not stopping Nomura from fighting back.