United States District Court, S.D. New York
Philippe Z. Selendy, Manisha M. Sheth, Deborah K. Brown, Jeffrey C. Miller, J. Matthew Hamann, QUINN EMANUEL URQUHART & SULLIVAN, LLP, New York, NY, for plaintiff Federal Housing Finance Agency.
David B. Tulchin, Steven L. Holley, Bruce E. Clark, Bradley A. Harsch, Katherine J. Stoller, SULLIVAN & CROMWELL LLP, New York, NY, Amanda F. Davidoff, Elizabeth A. Cassady, SULLIVAN & CROMWELL LLP, Washington, DC, for defendants Nomura Holding America, Inc., Nomura Asset Acceptance Corp., Nomura Home Equity Loan, Inc., Nomura Credit & Capital, Inc., Nomura Securities International, Inc., David Findlay, John McCarthy, John P. Graham, Nathan Gorin, and N. Dante LaRocca.
Thomas C. Rice, David J. Woll, Andrew T. Frankel, Alan Turner, Craig S. Waldman, SIMPSON THACHER & BARTLETT LLP, New York, NY, for defendant RBS Securities Inc.
OPINION & ORDER
DENISE COTE, District Judge.
This Opinion addresses defendants' motion to exclude, pursuant to Federal Rule of Evidence 702 and Daubert v. Merrill Dow Pharms., Inc., 509 U.S. 579 (1993), certain trial testimony of plaintiff Federal Housing Finance Agency's ("FHFA") expert witness Robert W. Hunter ("Hunter") regarding the "owner occupancy" statistics in the offering documents ("Offering Documents") at issue in this case. For the following reasons, the motion to exclude his testimony in its entirety is denied. Hunter may testify to owner occupancy issues to the extent described below.
FHFA, acting as conservator for Fannie Mae and Freddie Mac (together, the "Government Sponsored Enterprises" or "GSEs"), filed suit on September 2, 2011 against defendants alleging that the Offering Documents used to market and sell seven certificates ("Certificates") to the GSEs associated with residential mortgage-backed securities ("RMBS" or "Securitizations") contained material misstatements or omissions. RMBS are securities entitling the holder to income payments from pools of residential mortgage loans ("Supporting Loan Groups" or "SLGs") held by a trust.
FHFA brought these claims pursuant to Sections 11 and 12(a)(2) of the Securities Act of 1933 (the "Securities Act"), as well as Virginia's and the District of Columbia's Blue Sky laws. This lawsuit is the sole remaining action in a series of similar, coordinated actions litigated in this district by FHFA against banks and related individuals and entities to recover losses experienced by the GSEs from their purchases of RMBS. A description of the litigation and the types of misrepresentations at issue in each of these coordinated actions, including the instant case, can be found in FHFA v. Nomura Holding Am., Inc., ___ F.Supp. 3d ___, 11cv6201 (DLC), ___ WL 6462239, at *3-6, *16-17 (S.D.N.Y. Nov. 18, 2014) ("Nomura"), as well as FHFA v. UBS Americas, Inc., 858 F.Supp.2d 306, 323-33 (S.D.N.Y. 2012) (DLC), aff'd, 712 F.3d 136 (2d Cir. 2013) ("UBS").
In its Amended Complaint, FHFA alleges that the "owner-occupancy statistics reported in the Prospectus Supplements were materially false and inflated." Nomura's Prospectus Supplements for each Certificate included collateral tables displaying the percentage of loans within an SLG corresponding to three occupancy-status categories. For example, the Prospectus Supplement for Nomura Securitization 2006-FM2 records in two places that the mortgage loans in the relevant SLG were 93.05% "owner-occupied, " 6.37% "investment, " and 0.57% "second home." None of the Prospectus Supplements defines the term "owner occupied" or "occupancy status."
Each Prospectus Supplement states that the owner-occupancy status statistics are current as of the Securitization's Cut-Off Date. For example, Nomura's Securitization 2006-FM2 provides that "on the Cut-off Date, the Mortgage Loans [underlying the Securitization] will have the characteristics as set forth in the table[s]" containing the owner-occupancy percentages. The Cut-Off Dates for each Securitization were within a month of the Prospectus Supplement's dates. The dates of the corresponding Prospectus Supplements and their Cut-Off Dates are as follows:
Securitization Cut-Off Date Prospectus Supplement Date 2005-AR6 11/1/2005 11/29/2005 2006-FM11/1/2006 1/27/2006 2006-HE3 8/1/2006 8/29/2006 2006-FM2 10/1/2006 10/30/2006 2007-11/1/2007 1/29/2007 2007-2 1/1/2007 1/30/2007 2007-3 4/1/2007 4/27/2007
The table below, supplied by FHFA, illustrates that roughly a quarter (23%) of the loans in a sample drawn from SLGs were originated within 90 days of the Cut-Off Date; the other 77% were ...