Nomura blasts U.S. agency's case as $1 bln mortgage bond trial closes
By Nate Raymond
NEW YORK, April 9 (Reuters) - A lawyer for Nomura Holdings Inc argued Thursday that a U.S. regulator relied on "voodoo science" in suing the bank for making false statements in selling $2 billion in mortgage-backed securities to Fannie Mae and Freddie Mac.
David Tulchin, Nomura's lawyer, urged a Manhattan federal judge to reject the Federal Housing Finance Agency's bid to make the Tokyo-based bank and Royal Bank of Scotland Group Plc pay $1.1 billion over securities they sold ahead of the 2008 financial crisis.
During closing arguments in the non-jury trial, Tulchin told U.S. District Judge Denise Cote that the FHFA's claimed losses were not the banks' fault and were due to overall market conditions at the time of the 2008 crisis.
"Its losses on these seven certificates were caused not by any misstatements but by macroeconomic factors, most importantly the decline in housing prices," he said.
The lawsuit is the first to reach trial out of 18 the regulator filed in 2011 over some $200 billion in mortgage-backed securities that various banks sold Fannie Mae and Freddie Mac.
The FHFA says Nomura, the securities' sponsor, and RBS, an underwriter, misstated important details about the mortgages underlying more than $2 billion in securities sold to Fannie and Freddie.
Tulchin argued that the FHFA at trial introduced little testimony to back up its claims, instead relying on paid expert witnesses using "voodoo science" and questionable methodologies to analyze the mortgages underlying the securities.
"Cases that depend on paid experts hired for litigation can often be artificial," he said.
A lawyer for the FHFA, which has acted as Fannie and Freddie's conservator since their 2008 government takeover, is expected to present closing arguments Thursday afternoon.
The FHFA said that of the loans underlying the securities Fannie and Freddie bought from Nomura, 68.6 percent had underwriting defects. Nearly a third had false loan-to-value ratios, while 13.1 percent were underwater from the start, it said.
The FHFA previously obtained nearly $17.9 billion in settlements with banks including Bank of America Corp, JPMorgan Chase & Co and Deutsche Bank AG. Those deals followed a series of adverse rulings by Cote.
The case is Federal Housing Finance Agency v Nomura Holding America Inc, U.S. District Court, Southern District of New York, No. 11-06201.
(Reporting by Nate Raymond in New York; Editing by Noeleen Walder and Ted Botha)
