Last month's ruling in the Federal House Finance Authority's
(FHFA) case against Nomura and RBS may mark the beginning of
closure for the residential-mortgage backed securities (RMBS)
market, after the beating it has taken following the financial
crisis. The blows to RMBS were both physical to its value, and
emotional to its reputation.
The case centred on seven RMBS deals that the Japanese
financial company issued, four of which RBS underwrote. The
FHFA claimed the offering documents did not accurately reflect
the underlying mortgages. The judge agreed. In her ruling,
Judge Denise Cote wrote, 'the magnitude of the falsity,
conservatively measured, is enormous.' The misleading RMBS were
purchased by Fannie Mae and Freddie Mac,...