Nomura Asset Acceptance Corporation (NYSE: NMR) Investor Securities Class Action Lawsuit 07/01/2005

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Company Name(s): 
Nomura Asset
Case Name: 
Nomura Asset Acceptance Shareholder Class Action Lawsuit 07/01/2005
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Approved
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
07/01/2005
Class Period Begin: 
07/01/2005
Class Period End: 
11/30/2006
Class Period Begin: 
07/22/2005
Class Period End: 
01/31/2008
Court of Filing: 
U. S. District Court for the District of Massachusetts
Date Settled: 
08/07/2013
Settlement Amount: 
$21,200,000
Deadline to Participate in Settlement: 
12/26/2013
Summary: 

December 19, 2013 - The court approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys' fees and expenses, and dismissed the action with prejudice.

December 19, 2013 - The court held a final settlement hearing.

August 7, 2013 - The court preliminarily approved the settlement.

August 1, 2013 - Parties filed stipulation of settlement.

October 1, 2012 - The court denied the defendants' motion to dismiss.

February 15, 2011 - The plaintiffs notice of appeal was terminated and case was reopen per USDA Mandate.

January 25, 2011 - USCA judgment on notice of appeal was filed. The judgment of the district court was affirmed in part and vacated in part, and the matter was remanded to the district court for further proceedings consistent with the opinion issued. Each party will bear its own costs on the appeal.

October 27, 2009 - The lead plaintiff filed a notice of appeal.

September 30, 2009 - The court entered a judgment in favor of the defendants.

March 13, 2009 - Defendants filed a motion to dismiss second amended consolidated complaint.

January 20, 2009 - The lead plaintiff filed a second amended consolidated complaint on behalf of investors who purchased Mortgage Pass-Through Certificates of Nomura Asset Acceptance Corporation between July 22, 2005 and December 1, 2006. The lead plaintiff alleges that the defendants violated the Securities Act of 1933 by issuing false and misleading statements between July 22, 2005 and December 1, 2006.

December 19, 2008 - Lead plaintiff and lead counsel were appointed.

November 24, 2008 - Lead plaintiff motions were filed.

August 29, 2008 - Defendants filed a motion to dismiss.

June 30, 2008 - The plaintiff filed an amended complaint on behalf of investors who purchased Mortgage Pass-Through Certificates of Nomura Asset Acceptance Corporation (NYSE: NMR) between July 29, 2005 and December 1, 2006. The lead plaintiff alleges that the defendants violated the Securities Act of 1933 by issuing false and misleading statements between July 29, 2005 and December 1, 2006.

March 18, 2008 - The court ordered the transfer of this case to the to the U.S. District Court for the District of Massachusetts.

July 1, 2005 - An investor in shares of Nomura Asset Acceptance Corporation (NYSE: NMR) filed a lawsuit in the Suffolk County Superior Court against Nomura Asset Acceptance Corporation over alleged violations of Federal Securities Laws in connection with certain allegedly false and misleading statements made between July 1, 2005 and November 30, 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 (NYSE: NMR) pursuant and/or traceable to false and misleading Registration Statements and Prospectus Supplements issued in connection therewith by Nomura Asset Acceptance Corporation between July 1, 2005 and November 30, 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 Acceptance Corporation 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.

Nomura Asset Acceptance Corporation was formed in 1992 for the purpose of acquiring, owning and transferring mortgage loan assets and selling interests in them. Nomura Asset Acceptance Corporation 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 identified in 12, established by Nomura Asset Acceptance Corporation to issue billions of dollars worth of Certificates in 2005-2006.