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Fed. Hous. Fin. Agency v. Nomura Holding Am., Inc.

United States District Court for the Southern District of New York

May 11, 2015, Decided

11cv6201 (DLC)

Opinion

 [*449]  OPINION & ORDER

Table of Contents

PROCEDURAL HISTORY

BACKGROUND

I. RMBS.

A. Originating a Residential [**2]  Mortgage Loan

1. Credit and Capacity

2. Collateral

B. Overview of the Securitization Process

1. The Sponsor

2. The Depositor

3. The Underwriter

4. The Servicer

C. Structure of an RMBS Instrument and Credit Enhancement

1. Subordination

2. Overcollateralization

D. Securing a Credit Rating

E. "Scratch-and-Dent" Loans

F. RMBS Market Dynamics

II. The Seven At-Issue Securitizations.

A. Principal and Interest Payments

B. Age of Supporting Loans

C. The Certificates' Credit Enhancements

III. Due Diligence

A. Nomura's Due Diligence

1. Bidding Process

2. The Diligence Group

3. Credit & Compliance Due Diligence

a. Sampling

b. Instructions to Vendors

c. Credit and Compliance Vendor Procedures

d. Nomura's Review of Vendors' Results

e. Ignored Warning Signs

4. Valuation Due Diligence

a. Valuation Due Diligence Vendors

b. Nomura Reviews Results; Broker Price Opinions

5. Reviews

6. Purchasing the Loans

7. Selecting Loans for a Securitization

8. Data Integrity Due Diligence

9. Obtaining the Credit Ratings

B. RBS's Due Diligence

1. NEHLI 2006-HE3 and NHELI 2006-FM2

2. NHELI 2007-1 and NHELI 2007-2

a. Sample Selection

b. Due Diligence

3. Fraud Review

C. The Loan Pools for the Seven Securitizations

IV. The Offering Documents.

A. The Supplements' [**3]  "Summary" Section

B. Collateral Tables

C. Loans "Were Originated" Generally in Accordance with Guidelines.

D. Risk Advisories

V. Sample Selection

VI. Appraisals

A. Kilpatrick

1. Greenfield AVM

a. The Mechanics of the Greenfield AVM

b. Confirming the Accuracy of the Greenfield AVM

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104 F. Supp. 3d 441 *; 2015 U.S. Dist. LEXIS 61516 **; Fed. Sec. L. Rep. (CCH) P98,512

FEDERAL HOUSING FINANCE AGENCY, Plaintiff, -v- NOMURA HOLDING AMERICA, INC., et al., Defendants.

Subsequent History: Affirmed by Fed. Hous. Fin. Agency v. Nomura Holding Am., Inc., 2017 U.S. App. LEXIS 18803 (2d Cir., Sept. 28, 2017)

Prior History: Fed. Hous. Fin. Agency v. Nomura Holding Am., Inc., 2015 U.S. Dist. LEXIS 31229 (S.D.N.Y., Mar. 13, 2015)

CORE TERMS

loans, appraisals, originators, Securitizations, underwriting, due diligence, guidelines, Documents, ratios, Certificates, Prospectus, Supplements, defendants', borrower, rating, Offering, pool, investors, mortgage, Diligence, mortgage loan, collateral, compliance, factors, housing, score, causation, defects, entity, valuation