Royal Bank of Scotland has been taken to court in the US as part of the Federal Housing Finance Agency’s (FHFA) litigious campaign to recover part of the losses arising during the credit crunch.
Seeking to recoup at least $1bn, the US regulator has accused Nomura and RBS, as sponsor and underwriter respectively, of selling certain securities backed by flawed mortgages.
The FHFA claimed important details about underlying mortgages were mis-stated, according to Reuters andBloomberg.
It is waging its war of litigation on behalf of US government-chartered mortgage lenders Fannie Mae and Freddie Mac, which bought $200bn in mortgage-backed securities from various banks, including $2bn from Nomura that were underwritten by RBS.
The FHFA has claimed that the appraised values of the mortgages underlying the Nomura securites were inflated on average by 11.1%, with more than two thirds of a sample of the loans not underwritten in accordance with underwriting guidelines.
Unlike banks such as Citigroup, JPMorgan Chase and Bank of America, which have settled out of court, Nomura and RBS have denied and are contesting the allegations, arguing no misleading statements were made and any false statements were immaterial.
This makes the non-jury trial in Manhattan’s federal court one of the few US regulatory cases arising from the financial crisis to reach trial, barring any last-minute settlement.