Lehman Oct 26

Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Indemnification Claims

1. Lehman Says Loan Sellers Moved Assets To Skirt Mediation

   Oct 24, 2015 | Law360

   Lehman Brothers told a New York bankruptcy judge on Thursday that several dozen mortgage originators had transferred assets to dodge Lehman’s indemnification claims, and sought a court order forcing the entities now holding these loans to participate in mediation.

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Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Indemnification Claims

1. Lehman Says Loan Sellers Moved Assets To Skirt Mediation

   Oct 24, 2015 | Law360

   Lehman Brothers told a New York bankruptcy judge on Thursday that several dozen mortgage originators had transferred assets to dodge Lehman’s indemnification claims, and sought a court order forcing the entities now holding these loans to participate in mediation.
   
   Lehman wants the court to enforce an order from previous mediation sessions on 54 successors to the mortgage loan originators that is has identified. The mediation order deals with indemnification claims Lehman holds against around 3,000 originators, brokers and others that sold more than 11,000 allegedly defective mortgage loans to the failed investment bank.
   
   “While LBHI believes that the ADR order already requires participation, an order expressly governing successors will remove any doubt,” Lehman said. “Such an order is preferable to engaging in individualized motion practice compelling a party to participate and/or subjecting it to sanctions as permitted under the ADR order.”
   
   In early 2014, Lehman inked settlements with Fannie Mae and Freddie Mac over alleged misrepresentations the investment bank made about the quality of mortgage loans it sold to the federal loan mortgage guarantors.
   
   Those settlements allowed Lehman to seek reimbursement from the brokers and others who sold the loans to the investment bank, Lehman told the court.
   
   In July 2014, the bankruptcy court ordered the mortgage originators to participate in non-binding mediation with Lehman over the indemnification claims.
   
   Lehman told the court on Thursday it had investigated the mortgage sellers and believes at least 54 are now doing business under new names.
   
   “It is not uncommon for mortgage loan sellers experiencing financial or legal difficulties to attempt to avoid such problems by transferring their business to new or successor entities,” Lehman told the court.
   
   Lehman said that some of the successors to these loans told the investment bank they wouldn’t comply with the order, while others have denied any liability from their predecessors. The mortgage successors' objections to the claims can't preclude their participation in mediation because the ADR preserves those claims and will not end in a binding order on either side, Lehman said.
   
   While successors are generally not liable for their predecessors’ debts, state law makes exceptions when the new entity is a “mere continuation” of the old, or in similar circumstances such as mergers. Lehman claims those exceptions apply to the mortgage sellers that are operating with the same owners, locations, phone numbers or employees as they previously did.
   
   The law also makes an exception for businesses that have fraudulently transferred their assets, according to the investment bank. Lehman alleges that “many of the sellers likely received less than reasonably equivalent value for their business assets, transferred them while insolvent or were rendered insolvent by the transfer,” making those transfers fraudulent...

   For full story: http://www.law360.com/articles/718127/lehman-says-loan-sellers-moved-assets-to-skirt-mediation
   

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