Lehman Brothers Not Yet Done Suing Lenders, Continues to File Adversary Proceedings Against Mortgage Brokers
March 7, 2021, Southern District of New York – Lehman Brothers Holdings Inc. (“LBHI”), the plan administrator under the modified third amended joint Chapter 11 plan of Lehman Brothers Holdings Inc. and its affiliated debtors, continues to bring lawsuits against several defendants, mostly mortgage brokers, in the bankruptcy proceedings currently pending in the U.S. Bankruptcy Court for the Southern District of New York.
LBHI seeks to enforce its right to contractual indemnification for liabilities, losses, damages, claims, judgments and any other costs, fees, and expenses LBHI incurred due to defendants’ submission of defective mortgage loans or their failures to act and/or omissions.
By way of background, LBHI allegedly securitized certain loans which were marketed and sold to third-party investors. The complaint alleges that LBHI made certain representations and warranties regarding the quality and characteristics of the loans which, were coextensive with those made by several defendants. Adding further, the complaint avers that LBHI retained the right to seek indemnification from the defendants in the event, it becomes liable for certain indemnification events. After the trustees for hundreds of trusts (the “RMBS Trustees”) discovered that the mortgage loans allegedly breached certain of those representations and warranties, the RMBS Trustees filed claims in LBHI’s bankruptcy case for losses suffered on certain loans. The Court entered the order estimating allowed claim under RMBS settlement, resolving the majority of the claims. LBHI also settled RMBS Trustee claims as permitted by the plan.
Now, LBHI is bringing lawsuits to recover money damages from the defendants for the indemnification claims. So far, LBHI has initiated about 56 adversary proceedings against more than 60 defendants in the bankruptcy cases of Lehman Brothers. The largest claim in the group has been filed for recovery of $ 6,189,704.60 and $ 1,622,423.01 against First Priority Financial, Inc. and Caliber Home Loans, Inc., as the successor to First Priority Financial, Inc., and Apex Home Loans, Inc. respectively. In total, LBHI is looking to recover about $50 million from the lawsuits filed so far.