Thousands of mortgage lenders across the country either recently received, or will soon be receiving, this document from Lehman Brothers Holdings, Inc. (LBHI). It is a notice of a motion to approve a proposed settlement of Residential Mortgage-Backed Securities (RMBS) claims asserted by trustees and investors against LBHI over the last few years. The notice of proposed settlement refers to proposed findings of fact, sets a deadline (June 22) for objections to the settlement, and schedules a hearing date (July 6) for approval of the RMBS settlement.
The companies receiving this document are apparently those that LBHI believes originated and sold loans that are now part of the proposed settlement, which sets an estimated settlement price of $2.416 billion to be paid by LBHI to settle the claims against it. It is therefore a prelude to new payment demands (for alleged breaches of contractual representations and warranties) by LBHI against the mortgage lender/correspondent at some point after the bankruptcy court approves the settlement. This notice likely is also specifically motivated by LBHI’s desire to cut off one of the potential defenses to an indemnity claim, “failure to give notice.” Paragraph 3 of the proposed order appears to relate to that issue. Continue Reading