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Nomura Said to Balk at Settling Mortgage Bond Suit Filed by FHFA
Nomura Holdings Inc. is balking at following 16 other banks in settling a U.S. regulator’s allegations that Wall Street sold flawed mortgage securities during the housing boom, Bloomberg News reported today. Nomura’s resistance is less about the size of a penalty, which one estimate says won’t exceed $300 million, than its belief that the U.S. unit sued by the Federal Housing Finance Agency did nothing wrong. Nomura also asserts Fannie Mae and Freddie Mac might not suffer losses on the $2 billion of bonds it sold them. Nomura still has time to settle before a trial that’s scheduled to start in March.
S&P May Complete $1.38 Billion U.S. Deal as Early as Monday
Standard & Poor’s may complete as early as Monday a $1.38 billion accord with the U.S. and 19 states over claims it inflated subprime mortgage-bond ratings before the financial crisis, Bloomberg News reported yesterday. The ratings company deepened the 2008 economic collapse by giving top ratings to bad mortgage debt to win business from Wall Street banks, the government said. The U.S. said that it might seek as much as $5 billion when it sued S&P in 2013. The states and the District of Columbia also sued the McGraw Hill Financial Inc. unit. The Justice Department has secured settlements worth tens of billions of dollars during the past two years from mortgage lenders and banks it blamed for the financial crisis. Those companies generated unprecedented amounts of shoddy mortgages packaged and sold to investors as securities, many of which turned out to be worthless despite investment-grade ratings. New York-based S&P, the only credit rater sued by the Justice Department’s residential mortgage-backed securities working group, contends that it was singled out because it downgraded U.S. debt in 2011. Its competitors, which issued the same grades for the same securities, did not face similar suits. The case is scheduled for trial in September.
Ocwen Rejects “Baseless Allegations” of Mortgage Investors
An attorney for Ocwen Financial Corp., the embattled mortgage-servicing company, today issued a letter rejecting efforts by a group of large investors seeking to remove the firm as servicer of $82 billion of residential mortgage-backed securities, the Wall Street Journal reported today. Richard Jacobsen, an attorney with Orrick Herrington & Sutcliffe LLP, said that the investors had made “baseless allegations,” and that their letter late last week had “an inflammatory tone, with misleading content.” Jacobsen’s letter didn’t address the specific claims in the investors’ letter, which was released late Friday. The investors, who hold 25 percent of the private-label mortgage securities, include asset managers Pacific Investment Management Co., Kore Capital LP, MetLife Inc. and BlackRock Inc. The investors said in their letter that they had conducted a lengthy investigation and alleged that Ocwen had improperly enriched itself, made imprudent loan modifications, and failed to maintain adequate records or account for all the funds it was handling for the investors.
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