The Federal Housing Finance Agency's case against two of the world's largest banks, Nomura Holdings and the Royal Bank of Scotland for allegedly misrepresenting the quality of mortgage-backed securities sold to Fannie Mae and Freddie Mac is scheduled to go to trial next week. The non-jury trial in the U.S. District Court of the Southern District of New York in Manhattan is scheduled to begin on Monday, March 16. FHFA is said to be seeking 1 billion dollars in damages.
If no last-minute settlement is reached, Nomura and RBS would be the first two financial institutions to go to trial out of the 18 lenders FHFA sued in 2011 to recoup U.S. taxpayer costs following the government's $188 billion bailout of Fannie Mae and Freddie Mac in 2008, after which the government seized control of both Enterprises. The other 16 lenders have paid a combined total of about $24 billion to settle with FHFA, including 9.3 billion dollars paid by Bank of America in March 2014.
Recent actions by the Federal Housing Finance Agency indicate that the Agency is placing an increased emphasis on the clearing out of Fannie Mae's and Freddie Mac's seriously delinquent loan portfolios and steering more borrowers toward foreclosure prevention and loss mitigation actions, using foreclosure only as an absolute last resort. In early March, FHFA announced enhanced requirements for the sales of non-performing loans owned or backed by the GSEs, and Freddie Mac has sold two NPL portfolios in the last eight months totaling nearly $1.1 billion in unpaid balance.