On Monday, the U.S. District Court for the Southern District of New York laid down a ruling that holds two huge international banks accountable for their roles in selling toxic mortgage bonds to government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency's (FHFA) case against RBS Securities Inc. and Nomura Holding America and its sister companies contended that the organizations knowingly misrepresented the details behind mortgages that the banks ultimately securitized and sold to the GSEs.
The FHFA had brought 16 such lawsuits to various courts back in September 2011. The Nomura and RBS action is the only one that made it to trial, with cases against other banks being settled out of court.
Monday's decision was rendered by District Judge Denise Cote, who noted in the ruling that ‘the magnitude of falsity, conservatively measured, is enormous.’
‘This case is complex from almost any angle, but at its core, there is a single, simple question: Did defendants accurately describe the home mortgagesâ�¦for the securities they sold that were backed by those mortgages?’ the ruling reads.
‘The answer to that question is clearâ�¦Documents did not correctly describe the mortgage loans.’
Cote has requested that the FHFA offer a proposal for damages in the case. Coverage in the New York Times suggests that the figure could be as high as $500 million.
Read the full ruling here.