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Banks Rejected by U.S. High Court on Mortgage Securities Suits


bloomberg.com | January 13, 2015

By Greg Stohr

The U.S. Supreme Court dealt a blow to Royal Bank of Scotland Group Plc and Nomura Holdings Inc. (8604), refusing to derail federal government lawsuits that seek billions of dollars over the sale of risky mortgage-backed securities.

The justices today turned away an appeal by four banks, including units of RBS and Nomura, in a case stemming from the collapse of two credit unions that owned more than $1.7 billion in those securities.

High court review might have helped RBS fight off a separate suit by the Federal Housing Finance Agency over $32 billion in mortgage-backed securities. RBS now is likely to settle that case for at least $1.7 billion, according to Elliott Stein and Alison Williams, analysts with Bloomberg Intelligence. Nomura may settle a smaller FHFA lawsuit against it as well.

At issue was how much time federal agencies have to file lawsuits. The high court appeal centered on a provision, known as the Extender Statute, enacted as part of the 1989 law that bailed out the savings and loan industry. The Extender Statute gave government agencies longer to press at least some cases.

The banks contended the provision applies only to claims under state law and doesn’t affect a separate law’s three-year deadline for federal securities suits.

The Obama administration urged the Supreme Court not to hear the case, saying a federal appeals court was correct to let the National Credit Union Administration’s lawsuit against the banks go forward.

'No Evidence'

“There is no evidence that Congress intended the new, longer time limit it established for NCUA actions -- enacted in the context of recovering from one of the nation’s worst financial crises -- to be frustrated by the application of pre-existing shorter deadlines,” U.S. Solicitor General Donald Verrilli argued.

The banks appealing in the case also included units of Wells Fargo & Co. and Novation Cos. The group had backing from three industry trade associations.

Fifteen banks, including Bank of America Corp. and JPMorgan Chase & Co., have already settled mortgage-backed securities claims pressed by FHFA, the agency that regulates Fannie Mae and Freddie Mac.

RBS and Nomura said in court papers that the government was trying to buy time for itself to extract more settlements.

“It is hardly surprising,” the banks argued. “It has not finished targeting financial institutions with billions of dollars in potential exposure such that they have little choice but to settle in those jurisdictions that have adopted the government’s position.”

The case is Nomura Home Equity Loan v. National Credit Union Administration Board, 14-379.


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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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