Fed. Hous. Fin. Agency v. Nomura Holding Am., Inc.

• Decision Date: 11 May 2015
• Docket Number: No. 11cv6201 DLC.,11cv6201 DLC.
• Citation: 104 F.Supp.3d 441
• Parties: FEDERAL HOUSING FINANCE AGENCY, Plaintiff, v. NOMURA HOLDING AMERICA, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

104 F.Supp.3d 441

FEDERAL HOUSING FINANCE AGENCY, Plaintiff,
v.
NOMURA HOLDING AMERICA, INC., et al., Defendants.

No. 11cv6201 DLC.

United States District Court, S.D. New York.

Signed May 11, 2015.

104 F.Supp.3d 449

Philippe Z. Selendy, Richard I. Werder, Jr., Jonathan B. Oblak, Sascha N. Rand, Manisha M. Sheth, Andrew R. Dunlap, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, Richard A. Schirtzer, Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, CA, Jon Corey, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, D.C., for plaintiff Federal Housing Finance Agency.

David B. Tulchin, Steven L. Holley, Bruce E. Clark, Bradley A. Harsch, Katherine J. Stoller, Sullivan & Cromwell LLP, New York, NY, Amanda F. Davidoff, Sullivan & Cromwell LLP, Washington, D.C., for defendants Nomura Holding America, Inc., Nomura Asset Acceptance Corp., Nomura Home Equity Loan, Inc., Nomura Credit & Capital, Inc., Nomura Securities International, Inc., David Findlay, John McCarthy, John P. Graham, Nathan Gorin, and Dante LaRocca.

Thomas C. Rice, Andrew T. Frankel, Alan Turner, Craig S. Waldman, Minta Nester, John Robinson, Simpson Thacher & Bartlett LLP, New York, NY, for defendant RBS Securities Inc. (f/k/a Greenwich Capital Markets, Inc.).

OPINION & ORDER

DENISE COTE, District Judge:

Table of Contents

PROCEDURAL HISTORY	453
BACKGROUND	458

I. RMBS 458

A. Originating a Residential Mortgage Loan 458

1.	Credit and Capacity	458
2.	Collateral	460

B. Overview of the Securitization Process 462

1.	The Sponsor	463
2.	The Depositor	463
3.	The Underwriter	463
4.	The Servicer	463

C. Structure of an RMBS Instrument and Credit Enhancement 464

1.	Subordination	464
2.	Overcollateralization	464

D.	Securing a Credit Rating	464
E.	“Scratch–and–Dent” Loans	465
F.	RMBS Market Dynamics	466

II. The Seven At–Issue Securitizations 466

A.	Principal and Interest Payments	468
B.	Age of Supporting Loans	468
C.	The Certificates' Credit Enhancements	469

III. Due Diligence 469

A. Nomura's Due Diligence 470

1.	Bidding Process	471
2.	The Diligence Group	471
3.	Credit & Compliance Due Diligence	472

a.	Sampling	473
b.	Instructions to Vendors	473
c.	Credit and Compliance Vendor Procedures	474
d.	Nomura's Review of Vendors' Results	475
e.	Ignored Warning Signs	477

4. Valuation Due Diligence 478

a.	Valuation Due Diligence Vendors	478
b.	Nomura Reviews Results; Broker Price Opinions	479

5.	Reviews	479
6.	Purchasing the Loans	480

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