Supreme Court Rejects Banks’ Appeal Over Mortgage Securities Marketing

(Reuters) – The U.S. Supreme Court declined on Monday to hear an appeal brought by Nomura Holdings Inc. and the Royal Bank of Scotland Group PLC seeking to overturn an order requiring them to pay $839 million for making false statements while selling mortgage-backed securities to Fannie Mae and Freddie Mac.

The court left in place a September ruling by the New York-based 2nd U.S. Circuit Court of Appeals that went against the banks, which had challenged the 2015 award on multiple grounds.

Lawyers for Nomura and RBS could not immediately be reached for comment.

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The award stemmed from a lawsuit brought against Nomura and RBS by the Federal Housing Finance Agency in 2011. The FHFA has acted as conservator of mortgage agencies Fannie Mae and Freddie Mac since their 2008 takeover by the federal government after the collapse of the U.S. housing market.

The lawsuit was one of 18 brought by the FHFA that year over some $200 billion in mortgage-backed securities that banks sold Fannie Mae and Freddie Mac.

All the other lawsuits have been settled. The FHFA has recovered more than $23 billion from the settlements, including $5.5 billion from RBS in a different lawsuit, $5.83 billion from Bank of America Corp. and $4 billion from JPMorgan Chase & Co.

Following a non-jury trial, U.S. District Judge Denise Cote ruled in 2015 against Nomura, which sponsored $2 billion of securities sold to Fannie and Freddie, and RBS, which underwrote four of the deals.

She ruled that the offering documents for the securities did not correctly describe the underlying mortgages and ordered the banks to pay $806 million. The banks later agreed to pay another $33 million for costs and attorneys’ fees, subject to the outcome of their appeal.

(Reporting by Lawrence Hurley Editing by Will Dunham and Frances Kerry)

Copyright 2018 Reuters. Click for restrictions.

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