Nomura Holdings Inc has agreed to pay $480 million to resolve civil claims by the U.S. government that it misled investors in marketing residential mortgage-backed securities, U.S. authorities said on Tuesday.
Nomura knowingly bundled defective mortgage loans into marketable securities from 2006 to 2007 and misled investors about their quality, authorities said. The settlement stems from an investigation by federal prosecutors in New York.
“This settlement holds Nomura accountable for its fraudulent conduct in connection with its residential mortgage-backed securities offerings, which caused substantial harm to investors and contributed to the financial crisis of 2008,” said Richard Donoghue, the U.S. Attorney for the Eastern District of New York, whose office conducted the probe.
Nomura said in a statement it did not admit any wrongdoing in connection with the settlement, and disputed the allegations.
Authorities accused Nomura of falsely telling investors that it conducted extensive due diligence on the home loans that it securitized, when in fact they did not comply with underwriting guidelines or relied on fraudulent appraisals.
Nomura continued the practices despite warnings from its due diligence staff, who warned that Nomura was “turning into the lemming of the mortgage business” and dealing with “extremely dysfunctional” loan originators, authorities said.
Nomura’s misconduct caused “significant losses” for its investors, including retirement funds and university endowments, according to Donoghue’s office.
Nomura was previously ordered to pay a total of $839 million together with Royal Bank of Scotland Plc in a lawsuit brought by the Federal Housing Finance Agency, which has acted as conservator of mortgage agencies Fannie Mae and Freddie Mac since their 2008 takeover by the federal government after the collapse of the U.S. housing market.