Lehman to Pay $2.4 Billion out of Bankrupt Estate

“Lehman’s own documents show it was aware of the widespread problems and deteriorating performance of the loans it had securitized,” with half the loans at one point containing material misrepresentations, the trustees said in a court filing.

Editor’s Note: The difference is money — investors have it and borrower’s don’t. So while investors are successfully litigating fraud and deceit, the borrowers can’t afford to litigate the same issues. The idea that Lehman was somehow honest with borrowers and not with investors is preposterous.

Lehman recently closed out a $2 billion dispute with Citigroup Inc. over derivatives, and similar litigation over derivatives with Credit Suisse Group AG is the last major remaining contest.

Around 14 large institutional holders, including Goldman Sachs Asset Management LP and BlackRock Financial Management, broke ranks with hedge funds and accepted a settlement last year valuing claims around $2.4 billion. Chapman noted that these “sophisticated players” held around 24 percent of the RMBS.

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See Lehman Brothers Knew 1/2 the loans were misrepresented to both borrowers and investors

The trustees representing RMBS holders are Deutsche Bank National Trust Co., Law Debenture Trust Co. of New York, U.S. Bank National Association and Wilmington Trust Co., according to court papers.

A group of hedge funds, including Whitebox Advisors LLC, Deer Park Road Management Co. and Tilden Park Capital Management LP, was formed in 2016, and expanded in May 2017 to include Prophet Capital Management LP, Tricadia Capital Management LLC, BlueMountain Capital Management LLC and others, according to court records.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Practice note: Dig into the pleadings and exhibits in these cases and you will find a treasure trove of information that supports your contention at trial that the documents are unreliable and therefore the proof of the matters asserted must be proven with facts, not assumptions. You will probably uncover inconsistent allegations from Deutsch, Credit Suisse et al. They are most likely saying one thing in court with borrowers and another in court with investors.

An important note here is that these actions are based upon the presumptive finding of the US Bankruptcy trustee as to Lehman misrepresentations.

 

 

13 Responses

  1. right on, kalifornia re: caveats in note as to enforcement

    Like

  2. @ WileyC & ALL

    The following is an example of a BAILMENT related to the “pledge” at inception of the origination transaction that may be a helpful clue:

    BAILMENT SPECIFICATIONS

    Overview

    When delivering any mortgage loan which has been pledged as collateral for a line of credit, the lender must meet the following requirements:

    For each mortgage loan which is delivered to PennyMac and for which a third party holds an interest, a bailment letter must be included in each file and be identified sufficiently so PennyMac can match it to the correct mortgage loan. The bailment letter should include:
    The Correspondent’s name;
    The PennyMac loan number;
    The principal balance; and
    Wiring or payment instructions.
    When the Note is delivered, the bailment letter must be included with the Note. A bailment or trust arrangement is not established and a security interest in the mortgage loan is not valid if a bailment letter is sent to PennyMac separate from the applicable Note.
    In some instances, depending on lender specific Bailment language, PennyMac requires the warehouse lender to execute a Security Release Form. Correspondents must ensure their warehouse lenders have agreed to the Security Release Form and have approved the specific loan product for sale to PennyMac.

    Important: The bailment letter and the Note must be delivered to PennyMac or a designated custodian within 24 hours after delivery of the closed loan file.

    http://www.gopennymac.com/tools/seller-guide/bailment-specifications

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  3. FROM http://stopforeclosurefraud.com/2018/04/18/hsbc-bank-usa-national-association-v-buset-floridas-third-district-court-of-appeal-rejects-trial-courts-findings-on-borrowers-defenses-including-unclean-hands/

    ========================

    The note defined “Note Holder” as “anyone who takes this Note by transfer and who is entitled to receive payments under this Note.”

    …..this is where they missed it, IMO. I’ll have to read Horvath, but they apparently missed it, too. It’s “transfer” AND “entitled”, in clear attempt to restrict negotiability to holders with rights (“due course”). Besides the rights to receive payments, that engages the rights to enforce the mortgage. Without the entitlement, the note may be able to be enforced, but question whether the ‘mortgage follows’ in that instance, making the note unsecured. IAC, for sure, other than that was _never_ intended by the execution, regardless of UCC. Ever noticed how ‘customer’ and ‘borrower’ don’t seem to be interchangeable in any bank writings.

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  4. OK, the truth seems to be the notes were intentionally withheld from the trust for the three year term of it being a fixed rate, then, or in the event of a default (which was often forced at that point), things were magically swapped around to make it look like it went to the trust from the outset. This was so the holder could rehypothecate the paper in their own behalf during that three year term (or longer for fixed rate notes).

    Question would be, who was the holder during that time? Probably the same unnamed funder of the note at closing. A bank. A bank, which by law as I understand it, could not offer mortgages. The paper is designed to make it appear as though it were purchased, when it was really pledged in advance, and placed via a contracted agent in the form of a mortgage company.

    But, once in possession, the still unendorsed note became fodder for the derivative market of the holder.

    Welcoming all expansions, details of this story.

    Like

  5. Please go to Deadly Clear and read the links to working papers on rehypothecation,

    Like

  6. Ian — Absolutely!!!

    Wiley — A trustee is a trustee – is NOT a trustee — And, courts have no clue about derivatives. In name only — but under what CONTRACT?

    Derivatives Derivatives Derivatives. And, Derivatives are NOT securities — they are contracts. Default debt buyers hiding under a fake trust and fake trustee. Courts just don’t get it. But no case brings it up. NO CASE BRINGS UP DERIVATIVES. NONE. And, neither did the government when they bailed out.

    I would love to see a case that brings up DERIVATIVES. Until that happens — just spinning wheels.

    Like

  7. Man, that Buset overturn is a real kicker….

    http://stopforeclosurefraud.com/2018/04/18/hsbc-bank-usa-national-association-v-buset-floridas-third-district-court-of-appeal-rejects-trial-courts-findings-on-borrowers-defenses-including-unclean-hands/

    Enough time has gone by that bank attorneys are getting their word stream in place. Of course, Florida obliges.

    Like

  8. ANON- by continually referring to borrowers as having made misrepresentations on their loan apps, it is a continuation of the mainstream
    Media and the people pulling the strings to direct the blame to anyone other than the investment banks, TBTF banks, mortgage originators, brokers, and title insurance companies. Also the bond rating firms: Moody’s, Dun & Bradstreet, Fitch. Had they rated the defective mortgages as junk, rather than AAA, this whole horrid show would have been avoided, as no investment fund on earth would have bought the MBS. That’s how Insee it anyway
    To

    Like

  9. Why do they insist that borrowers misrepresented on applications? If any borrowers did that, it was small in number. I know of no borrowers that misrepresented.

    Like

  10. Reblogged this on Deadly Clear.

    Like

  11. so is this case limited to Lehman related litigation and claims?

    Like

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