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Lehman Jan 7
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Lehman Goes After Standard Pacific For Mortgage Losses
Jan 6, 2016 | Law360
By Jeff Montgomery
Bankrupt Lehman Brothers sued Standard Pacific Mortgage Inc. on Wednesday in New York federal court over what it said were sales of defective mortgages, adding to a steadily growing list of company lawsuits filed in a bid to recover hundreds of millions of dollars in losses to Lehman’s estate.
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Standard Pacific Mortgage Inc.
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Lehman Goes After Standard Pacific For Mortgage Losses
Jan 6, 2016 | Law360
By Jeff Montgomery
Bankrupt Lehman Brothers sued Standard Pacific Mortgage Inc. on Wednesday in New York federal court over what it said were sales of defective mortgages, adding to a steadily growing list of company lawsuits filed in a bid to recover hundreds of millions of dollars in losses to Lehman’s estate.
Lehman Brothers Holdings Inc.’s suit against Standard Pacific, formerly known as Family Lending Services Inc., seeks recovery for 24 mortgage loans purchased from SPM that Lehman said were defective. Lehman filed a similar action Tuesday in the same court against Stearns Lending LLC over 18 loans purchased from that company.
Lehman’s actions, which do not specify dollar losses, are part of wider litigation aimed at recovering billions in losses on subprime mortgages, interest rate swaps and derivatives before and after the company’s collapse and bankruptcy filing in 2008, a milestone event in the subsequent financial crisis.
The mortgages Lehman is now suing over were also part of Lehman’s past litigation with Freddie Mac and Fannie Mae. Last year, Lehman agreed to pay Freddie Mac $767 million and Fannie Mae $442 million to settle allegations it sold toxic mortgages to the housing finance agencies, with Fannie Mae’s claims once totaling $18.9 billion.
Lehman’s latest suits charge that the company was forced to pay Fannie Mae and Freddie Mac in part because Stearns and Standard Pacific misled them into buying the bad batch of loans in the first place.
“Breaches, acts or omissions” by SPM when selling mortgages to Lehman “resulted in LBHI’s liability to Fannie Mae and Freddie Mac” for unsuitable mortgages sold to the quasi-governmental housing finance agencies, the suit says. The Stearns action uses similar language.
Lehman’s agreements with SPM and Stearns included assurances from both companies that the mortgages were sound and properly processed, according to the lawsuits. Lehman says Fannie Mae and Freddie Mac’s finding that the mortgages were defective supports its suits against Standard Pacific and Stearns.
Attorneys for the parties could not be reached for comment Wednesday.
Lehman is seeking damages, interest expenses and costs for its legal actions in both cases. Some 3,000 mortgage originators may eventually face indemnification claims by the company, according to company disclosures in a New York bankruptcy court case last year.
These latest suits are part of Lehman’s larger recovery campaign, which extends beyond mortgages. The company has filed a series of suits to recover money from investors or customers it said made gains by improperly timing or structuring transactions while Lehman was hobbled in the early years of its bankruptcy.
As recently as last month, a Lehman subsidiary sued HSBC Bank PLC and related global companies over what Lehman described in part as an international “shell game” designed to keep it from collecting in bankruptcy court on debts involving thousands of derivative trades.
Late last year, Lehman told a federal judge that several dozen loan originators appeared to have engaged in similar behavior, and sought court-ordered mediation to resolve its claims.
In September, Federal Home Loan Bank of New York made an unsuccessful bid to have a $150 million claim by Lehman reduced in a case involving undervalued interest rate swaps and derivative transactions. Lehman alleged the deals were wrongly terminated after its collapse in 2008, even though Lehman was in the money at the time.
Late last month, Lehman also sued ACTS Retirement-Life Communities, saying the country’s largest not-for-profit retirement home operator similarly cheated Lehman by improperly timing the terminations of interest rate swap deals to fees. The moves earned ACTS millions that it was not entitled to, Lehman said...For full story: http://www.law360.com/articles/743293/lehman-goes-after-standard-pacific-for-mortgage-losses
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Standard Pacific Mortgage Inc.
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