Nomura Plans Its First U.S. Mortgage Debt Since Financial Crisis

Nomura Holdings Inc. (8604), Japan’s biggest brokerage, plans to sell securities tied to $440.1 million of new U.S. home loans without government backing, its first such deal since the debt helped spark the financial crisis in 2008.

The transaction is tied to prime jumbo mortgages, all of which were originated by First Republic Bank (FRC), Kroll Bond Rating Agency said today in a pre-sale report. The ratings company plans to assign top grades to most of the debt, with homeowner equity averaging 34.4 percent providing “a substantial margin of safety against potential home price declines.”

Neither Nomura nor First Republic, nor any of their affiliates, “intend to retain any interest in the securitization,” Kroll said in the report.

The securities are being sold with investors in the market demanding safer bonds and higher yields relative to benchmark interest rates as a potential slowing of Federal Reserve debt buying roils credit markets. Jonathan Hodgkinson, a spokesman for Nomura in New York, didn’t immediately return an e-mail seeking comment.

Sales of bonds known as non-agency mortgage securities had been recovering after freezing five years ago amid tumbling home values and soaring defaults, following issuance of $1.2 trillion in each of 2005 and 2006. Deals tied to new loans total about $8 billion this year, up from $3.5 billion in all of 2012, according to data compiled by Bloomberg.

Jumbo home loans are ones larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in some areas. For Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments, limits range from $417,000 to $625,500.

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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