Nomura Holdings Inc. and Royal Bank of Scotland Group Plc may face $500 million in damages for what a judge called an “enormous” deception in the sale of defective mortgage-backed securities, a ruling that may spur other banks to settle similar claims tied to the 2008 financial crisis. The FHFA, which has acted as conservator for Fannie and Freddie since the government took them over in 2008, welcomed the ruling, which nonetheless appeared to deliver less than the $1 billion it sought at trial. “The offering documents did not correctly describe the mortgage loans,” Cote, who heard the case without a jury, wrote Monday. “The magnitude of falsity, conservatively measured, is enormous.” 
 
 Before the trial, FHFA had reached $17.9 billion in settlements with other banks, including Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. ‘Consistently Candid’ 
 
 “Nomura is confident that it was consistently candid, transparent and professional in all of its dealings with Fannie Mae and Freddie Mac,” Jonathan Hodgkinson, a U.S.-based spokesman for the bank, said in an e-mailed statement. Linda Harper, a U.K.-based spokeswoman for RBS, declined to comment on the decision. FHFA is pleased with the ruling and “looks forward to submitting proposed damages,” the agency’s general counsel, Alfred M. Pollard, said in an e-mailed statement. “The origination and securitization of these defective loans not only contributed to the collapse of the housing market, the very macroeconomic factor that defendants say caused the losses,” she wrote, “but once that collapse started, improperly underwritten loans were hit hardest and drove the collapse even further.” “Given this attitude, it is unsurprising that even when there were specific warnings about the risk of working with an originator, those warnings fell on deaf ears.” 
 
 During the trial, expert witnesses performed analyses of some of the loans backing the disputed bonds. The banks may use a series of rulings against them by Cote, before and during trial, as issues on appeal, lawyers said.  NEW YORK A U.S. judge on Monday ruled that Nomura Holdings Inc (8604.T) made false statements in selling mortgage-backed securities to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) ahead of the 2008 financial crisis. Nomura was the securities' sponsor, and RBS underwrote four of the deals. The banks also said that any alleged misstatements didn’t factor into decisions by Fannie Mae and Freddie Mac to buy the securities. In her ruling, Cote said the securities sold to Fannie Mae and Freddie Mac "were supported by loans for which the underwriting process had failed," with deals comprised of 45 percent to 59 percent "materially defective" mortgages. The lawsuit was the first to reach trial out of 18 the regulator filed in 2011 over some $200 billion in mortgage-backed securities that various banks sold Fannie Mae and Freddie Mac. U.S. District Judge Denise Cote in Manhattan ruled for the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, in a ruling that could allow the U.S. regulator to recover around $450 million.
– If you had to name two banks guilty of selling lousy mortgage packages during the financial meltdown of 2008, it's doubtful you'd tick off the names Nomura Holdings of Japan and the Royal Bank of Scotland. But as Reuters reports, a federal judge yesterday declared that both lied through their teeth when selling their deals to the government-owned entities of Fannie Mae and Freddie Mac. US District Judge Denise Cote of Manhattan, who decided the case on her own, framed it in straightforward terms in a line that Wall Street critics will love: “The magnitude of falsity, conservatively measured, is enormous.” Other banks such as Goldman Sachs and Bank of America opted to settle rather than go to trial, with Nomura and RBS the first two to do so. Legal experts tell the New York Times that they might have been less worried about their reputations taking a hit in the US because they were foreign banks. Nomura plans to appeal, with no word yet from RBS. The ruling puts the banks on the hook for about $500 million in penalties, though that's only about half of the original claim by the government, reports Bloomberg.