Nomura Asset was formed in 1992 for the purpose of acquiring, owning and transferring mortgage loan assets and selling interests in them. Nomura Asset is a subsidiary of Nomura Asset Capital Corporation and is engaged in mortgage loan lending and other real estate finance-related businesses, including mortgage loan banking, mortgage warehouse lending, and insurance underwriting. The issuers of the various offerings are the Trusts established by Nomura Asset to issue billions of dollars worth of Certificates in 2005-2006.
According to the Complaint originally filed in the Suffolk County Superior Court, this is a securities class action on behalf of all persons or entities who acquired the Mortgage Pass-Through Certificates of Nomura Asset Acceptance Corporation pursuant and/or traceable to false and misleading Registration Statements and Prospectus Supplements issued in connection therewith by Nomura Asset between July 2005 and November 2006. This action involves solely strict liability and negligence claims brought pursuant to the Securities Act of 1933.
On July 29, 2005 and April 24, 2006, Nomura Asset and the Defendant Issuers caused Registration Statements to be filed with the Securities and Exchange Commission ("SEC") in connection with and for the purpose of issuing hundreds of millions of dollars of Certificates. The Certificates were issued pursuant to Prospectus Supplements, each of which was incorporated into the Registration Statements. The Certificates were supported by pools of mortgage loans. The Registration Statements represented that the mortgage pools would primarily consist of loans generally secured by first liens on residential properties, including conventional, adjustable rate and negative amortization mortgage loans.
Investors purchased the Certificates based upon three primary factors: return (in the form of interest payments), timing of principal and interest payments, and safety (risk of default of the underlying mortgage loan assets). The Registration Statements were materially false and misleading in that they included false statements and/or omissions about: (i) the underwriting standards purportedly used in connection with the underwriting of the underlying mortgage loans; (ii) the maximum loan-to-value ratios used to qualify borrowers; (iii) the appraisals of properties underlying the mortgage loans; and (iv) the debt-to-income ratios permitted on the loans.
The true facts were: (a) that the sellers of the underlying mortgage loans to Nomura Asset were issuing many of the mortgage loans to borrowers who: (i) did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender; (ii) did not provide adequate documentation to support the income and assets required to issue the loans pursuant to the lenders' own guidelines;(iii) were steered to stated income/asset and low documentation mortgage loans by lenders, lenders' correspondents or lenders' agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation; and (iv) did not have the income or assets required by the lenders' own guidelines to afford the required mortgage loan payments, which resulted in a mismatch between the needs and capacity of the borrowers; (b) that the lenders or the lenders' agents knew that the borrowers either could not provide the required documentation or the borrowers refused to provide it; (c) that, in fact, the underwriting, quality control, and due diligence practices and policies utilized in connection with the approval and funding of the mortgage loans were so weak that borrowers were being extended loans based on stated income in the mortgage loan applications with purported income amounts that could not possibly be reconciled with the jobs claimed on the loan application or through a check of free online salary databases such as salary.com; and (d) that the appraisals of many properties were inflated, as appraisers were induced by lenders, lenders' correspondents and/or their mortgage brokers/agents, to provide the desired appraisal value regardless of the actual value of the underlying property so the loans would be approved and funded. In this way many appraisers were rewarded for their willingness to support preconceived or predetermined property values, violating USPAP regulations.
As a result, the Certificates sold to Plaintiff and the Class were secured by assets that had a much greater risk profile than represented in the Registration Statements. In this way, Defendants were able to obtain superior ratings on the tranches or classes of Certificates, when in fact these tranches or classes were not equivalent to other bond investments with the same credit ratings.
By the summer of 2007, the truth about the performance of the mortgage loans that secured the Certificates began to be revealed to the public and the rating agencies began to put negative watch labels on Certificate tranches or classes, ultimately downgrading many. As a result, the Certificates should receive less absolute cash flow in the future and will not receive it on a timely basis. As an additional result, the Certificates are no longer marketable at prices anywhere near the price paid by Plaintiff and the Class and the holders of the Certificates are exposed to much more risk with respect to both the timing and absolute cash flow to be received than the Registration Statements/Prospectus Supplements represented.
On March 18, 2008, the case was transferred from the Suffolk County Superior Court, Massachusetts to the U.S. District Court for the District of Massachusetts. The Plaintiffs filed an amended Complaint on June 30, 2008 prior to any rulings on consolidation.
On June 30, 2008, the Plaintiffs filed an amended Complaint. The Defendants responded by filing a motion to dismiss the amended Complaint. On December 19, 2008, Judge Richard G. Stearns granted the motion to appoint the Pension Funds as lead Plaintiff and approved the Pension Funds selection of Coughlin Stoia Geller Rudman & Robbins LLP to serve as lead Counsel and Shapiro Haber & Urmy LLP to serve as liaison Counsel. On January 20, 2009, the lead Plaintiff filed a Consolidated Amended Complaint for Violation of §§11, 12(a)(2) and 15 of the Securities Act of 1933. The Defendants filed two motions to dismiss the Consolidated Amended Complaint on March 13, 2009. On October 1, 2009, the Court entered the Memorandum and Order signed by Judge Richard G. Stearns granting the Defendants’ motions to dismiss with prejudice. Judgment was entered and the case is now closed.
On October 27, 2009, the lead Plaintiffs filed a Notice of Appeal in the First Circuit Court of Appeals as to the Judgment and Order dismissing the action.
According to an article dated January 24, 2011, in a January 20 opinion written by Judge Michael Boudin for a three judge panel, the First Circuit affirmed Judge Stearns’ dismissal except with respect to the Plaintiffs’ allegations concerning the mortgage originators’ underwriting practices.
On February 15, 2011, the case was reopened per USCA Mandate.
On October 1, 2012, the Court issued an Order denying Defendants' renewed motion to dismiss and allowing Plaintiffs' motion to proceed with the litigation.
On May 23, 2013, the Court issued an Electronic Order granting the Joint Motion of the parties to stay this case.
On July 29, 2013, the parties entered into a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on August 7. On December 19th, the Court granted final approval of the Settlement and ordered this case to be dismissed with prejudice. This was accompanied by an Order approving attorneys' fees and expenses.
