NEW YORK (Reuters) – A U.S. judge’s ruling that Nomura Holdings Inc and Royal Bank of Scotland Group Plc made false statements selling mortgage-backed securities to Fannie Mae and Freddie Mac could result in a judgment exceeding $805 million, a U.S. regulator’s lawyer said on Tuesday.
Philippe Selendy, a lawyer for the Federal Housing Finance Agency, gave his estimate of the final judgment’s amount a day after U.S. District Judge Denise Cote in Manhattan found the banks liable for conduct preceding the 2008 financial crisis.
Cote’s 361-page ruling left unclear the exact amount to be recovered by the FHFA, which has acted as conservator for Fannie and Freddie since the government took them over in 2008.
Selendy said in an email, however, that he expected the judgment to total about $805 million, plus attorney’s fees and costs. A proposed judgment is expected to be filed in court Friday.
“The exhaustive opinion of the court, after a full trial on the merits, decisively puts to rest the myth that bankers’ misconduct was not a driving force behind the crisis,” said Selendy, a lawyer at Quinn Emanuel Urquhart & Sullivan.
While the banks would have to pay the FHFA $805 million, they would receive the mortgage bonds in exchange, which a defense expert witness at trial estimated were worth $434 million to $479 million as of March 26.
Representatives for Nomura and RBS declined to comment. Nomura has said it will appeal Cote’s ruling.
The lawsuit was the first to reach trial of 18 filed by the regulator in 2011 over some $200 billion in mortgage-backed securities that various banks sold Fannie Mae and Freddie Mac.
The FHFA has obtained nearly $17.9 billion in settlements from institutions that include Bank of America Corp, JPMorgan Chase & Co and Deutsche Bank AG. Those deals followed adverse rulings by Cote.
Following a non-jury trial, Cote ruled against Nomura, which sponsored $2 billion of securities sold to Fannie and Freddie, and RBS, which underwrote four of the deals.
“The offering documents did not correctly describe the mortgage loans,” Cote wrote. “The magnitude of falsity, conservatively measured, is enormous.”
The case is Federal Housing Finance Agency v Nomura Holding America Inc, U.S. District Court, Southern District of New York, No. 11-06201.