February 5, 2014 View entire issue of ANO         Close 

Fannie Mae Resolves $18.9 Billion Claim against Lehman Brothers

Fannie Mae reached a settlement with the remnants of Lehman Brothers Holdings that will resolve an $18.9 billion claim against the investment bank over mortgage loans and mortgage-backed securities it sold the government-sponsored enterprise before the financial crisis, The Wall Street Journal reported Jan. 24.

Fannie will receive a general unsecured claim of $2.15 billion, which under Lehman’s Chapter 11 payment plan means the GSE would receive about 25 cents on the dollar — around $537.5 million.

The settlement still must meet court approval, and if it does it will allow the bank’s estate to pay an additional $400 million as part of its fifth distribution to creditors. The bank already has paid $50 billion to creditors since coming out of bankruptcy protection in March 2012. That figure may reach $80 billion by this summer, the Journal reported.

The deal also would allow Lehman to go after third-party mortgage originators and sellers who pushed bad loans into Lehman’s mortgage division.

Fannie’s general counsel, Bradley Lerman, told the Journal, “Fannie Mae is committed to putting legacy issues behind us so we can focus on building a strong, sustainable housing finance system for the future.”

Lehman’s was the largest bankruptcy in U.S. history and helped trigger a global financial crisis, the Journal reported. Barclays purchased Lehman’s main business while the bank’s New York-based holding company exited bankruptcy last year. A new board of directors is in the multiyear process of winding down the bank’s remaining holdings and liquidating the estate.

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