On November 18, Judge Denise Cote of the United States District Court for the Southern District of New York granted the Federal Housing Finance Agency’s motion for partial summary judgment on the statute of limitations defense asserted by Nomura and related entities. FHFA, as conservator for Fannie Mae and Freddie Mac, alleges that Nomura made materially false statements in offering documents for RMBS between 2005 and 2007 in violation of Sections 11 and 12(a)(2) of the Securities Act of 1933. Judge Cote found that Fannie and Freddie did not have sufficient information by September 2007 to determine whether the offering documents contained misstatements, and that a reasonably diligent investor in their position would not have investigated the offering documents or discovered the misstatements by that date. As a result, the Court held that FHFA’s claims were not barred by the statute of limitations. Opinion & Order.
Fannie Mae and Freddie Mac
Goldman Reaches Settlement with FHFA
On August 22, Goldman Sachs and FHFA announced a US$3.15 billion settlement of claims brought by FHFA against Goldman in two separate lawsuits related to RMBS purchased by Fannie Mae and Freddie Mac between 2005 and 2007. FHFA, as conservator for Fannie Mae and Freddie Mac, asserted claims for violations of federal and state securities law on the basis of alleged material misrepresentations or omissions in the offering documents for the RMBS sold to Fannie Mae and Freddie Mac. As part of the settlement, Goldman is repurchasing most of the RMBS at issue. Goldman did not admit any liability or wrongdoing as part of the settlement. Fannie Mae Agreement. Freddie Mac Agreement.
FHFA Wins Summary Judgment That It Did Not Have Actual Knowledge of RMBS Misrepresentations
On July 30, Judge Denise Cote of the United States District Court for the Southern District of New York granted the motion for partial summary judgment brought by FHFA, as conservator for Fannie Mae and Freddie Mac. FHFA initiated securities fraud cases against a number of banks alleging false statements made in the offering documents for RMBS purchased by the GSEs between 2005 and 2007. FHFA’s action remains pending against HSBC, Goldman Sachs, RBS Securities and others. In its motion for summary judgment, FHFA sought a ruling that no reasonable jury could find that the GSEs knew the banks’ statements were false. The defendants argued seven categories of circumstantial evidence illustrated the GSEs’ awareness of the information that they now allege was concealed. These included the GSEs’ knowledge about loan originators, participation in the subprime and Alt-A markets, knowledge of risk associated with reduced documentation programs, and anti-predatory lending reviews. The court held that these categories were not enough to prove that the GSEs had actual knowledge that any representation was false, as required by Sections 11 and 12(a)(2) and the Blue Sky Laws. The court therefore granted summary judgment for FHFA on that issue. Decision.